Why Landlord Insurance Is More Expensive than Homeowners

Laura Olson
Mar 4, 2023

You may wonder what the difference is between landlord insurance and homeowners insurance and which policy is more expensive. The answer depends on several factors, but landlord insurance generally costs more.

The reason for this is due to the different risks landlords face when compared to homeowners. For example, landlords are responsible for the property and any damage sustained while a guest or tenant is renting it, whereas homeowners are only responsible for their home and its contents.

In this article, you’ll learn the fundamental differences between the two types of insurance so you can decide which policy is best for your situation.

Landlord Insurance vs. Homeowners Insurance

Many people aren’t clear on the distinction between landlord and homeowners insurance. From levels of coverage to policy limits and pricing, there are several differences to be aware of before deciding which one to choose.

The key factor is the type of property each policy covers. Understanding this is critical to deciding which one applies to your property.

Homeowners insurance coverage is for a homeowner residing on the property and is only applicable if your property is your primary residence. On the other hand, landlord insurance is for property owners renting out their property and earning rental income from it.

If you move out of your primary residence and convert it into a rental property, it ceases to be your primary residence. Your homeowners policy will not cover you, which creates the need for landlord insurance coverage.

How Much is Landlord Insurance?



What Does a Homeowners Insurance Policy Cover?

As a homeowner, while you don’t need to be constantly concerned about potential damage related to tenants, you are still at risk of incurring substantial costs if something happens to your home.

Homeowners insurance can provide financial protection in the event of an emergency. This protection can include paying for repairs, liability coverage, and providing alternate accommodations if your property becomes uninhabitable.

A standard homeowners policy typically includes fire, theft, legal responsibility, and loss or damage caused by natural disasters. Investing in homeowners insurance is essential for safeguarding your home and investments.

Property Damage

A homeowners policy covers the exterior and interior of the home and additional structures, including fences, garages, and gazebos. The coverage protects against damages from several perils, including fire, lightning, hail, and hurricane.

The number of covered events varies depending on the type of homeowners policy you choose, but most basic insurance policies provide this coverage. When choosing a policy, it's always best to get one that covers the cost of rebuilding your home based on current material and construction costs.

Personal Belongings

Your personal possessions are essential parts of your life and can leave you with significant out-of-pocket replacement costs if stolen or damaged. Homeowners insurance provides financial protection to alleviate such losses in an emergency, covering items such as furniture, appliances, clothing, jewelry, and artwork.

Keeping a detailed inventory of your possessions is a great way to ensure you obtain the proper coverage for them.

Liability

Your homeowners policy addresses legal costs, medical fees, and additional damages arising from third party claims and/or liability lawsuits. These lawsuits could arise from you, a family member, or even your pet causing property damage or bodily harm to a third party.

For instance, if your dog bites a visitor or a baseball shatters your neighbor's glass patio door while your kids play in the backyard, your homeowners insurance may cover these incidents.

Living Expenses

If your house becomes uninhabitable due to damage from a covered event, your homeowners policy covers the extra cost of living elsewhere within reason. This protection includes hotel costs, rent, food, and other additional expenses.

Reimbursements will help save you money, but be mindful of the limits set by your insurer since these depend on your coverage level.

What Does a Landlord Insurance Policy Cover?

Owning a rental property presents different risks than a primary residence due to your exposure to known and/or unknown tenants and your potential liability for damages they may cause. As a landlord, you are responsible for completing any repairs and complying with local ordinances and regulations.

A comprehensive landlord insurance policy offers financial protection for damage to the property. From legal liability to loss of rental income, let’s look at what a landlord insurance policy typically covers.

Property Damage

Landlord insurance protects the structures on your rental property from covered perils like fire, vandalism, hail, and malicious damage done by tenants.

Besides your property's structure, the policy can also include personal property coverage. However, this only covers the landlord's items used to service the property, like appliances and furniture provided by the landlord.

Loss of Income

If your property becomes uninhabitable due to a covered event, you may lose rental income and be unable to meet mortgage or utility payments. Fortunately, the loss of use coverage included in some landlord insurance policies reimburses you for lost rental income so you don't have to bear the burden alone.

Liability

Landlord insurance protects you from claims and/or litigation should a third party suffer bodily injury or property damage while on your premises, such as an accidental fall caused by poor maintenance. Your policy may even cover wrongful eviction lawsuits and discrimination claims from former tenants.

Average Cost of Landlord Insurance Coverage

When shopping for landlord insurance, it typically costs about 25% more than a conventional homeowners insurance policy. The actual cost depends on the property size, features, and the type and amount of coverage a landlord needs.

Generally, landlord insurance can range from $800 to $3,000 per year for a 3-bed, 2-bath single-family rental, depending on the state.

Looking to see if you save on your landlord insurance policy? With Obie, real estate investors and landlords can access instant insurance quotes tailored to their needs in all 50 states, helping protect their investments and offering peace of mind while they manage their rental properties. To date, Obie has insured over $4 billion in rental properties across the U.S.

10 Ways to Keep Landlord Insurance Premiums Low

As a landlord, you understand the importance of having insurance coverage to protect your assets. However, high premiums can be an unwelcome expense. Fortunately, there are several steps you can take to reduce your insurance premiums and still get the coverage you need.

  1. Increase your deductible amount. Increasing the deductible on your landlord insurance policy will reduce the cost of premiums since it’s a direct exchange of risk between you and your insurer.
  1. Choose a suitable policy limit. Ensure the policy you select has an appropriate coverage limit that helps lower your premium costs.
  1. Review your coverage annually. To be sure you’re not paying too much for coverage, take time each year to review the type of protection you need and compare prices from different insurers.
  1. Bundle policies. Consider bundling multiple insurance policies, such as homeowners and auto, with the same insurance provider. It can result in savings on all your policies, including your landlord insurance premiums.
  1. Implement safety measures. Installing safety features such as smoke detectors and proper lighting can help to reduce risks, which can also reduce the cost of premiums for landlord insurance policies.
  1. Compare quotes. Shop around and compare quotes from different insurance companies to find the best deal on landlord insurance.
  1. Maintain good credit. Insurers often consider a person’s credit score when calculating premiums, so maintaining a good credit rating can help keep your costs lower.
  1. Stay up to date on safety regulations. Keeping your rental property in compliance with all relevant local safety regulations is essential for keeping your premium costs low.
  1. Check for discounts. Many insurers offer discounts for landlords who meet specific criteria, such as installing certain types of locks or offering smoke detectors in their rental units.
  1. Invest in a protective liability policy. Purchasing a liability policy, such as an umbrella or excess liability policy, can provide additional protection at a fraction of the cost of traditional landlord insurance policies.

Next Steps: Get an Instant Landlord Insurance Quote from Obie

Obtaining a landlord insurance policy can be overwhelming with all the options available on the market, but Obie makes it easier than ever.

Obie is an online insurance broker with cutting-edge technology to give you instant quotes from top-rated carriers in all 50 states. Obie’s platform allows you to compare policies quickly and decide on the one that best meets your needs.

Featured in some of the top insurance, tech, and business blogs around the globe,  including Business Insider, Forbes, and TechCrunch, Obie’s innovative approach is changing how investors and landlords obtain insurance.

If you’re a landlord looking for an efficient way to purchase reliable coverage at an affordable price, Obie might just be your best option. To get started, visit Obie’s website and enter your rental property address to receive a free instant quote for landlord insurance.

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