How to Choose the Right Landlord Insurance Policy

Investing in rental property can be profitable but carries various risks. Landlords must deal with potential property damage and liability concerns, which can lead to significant financial challenges. However, having the appropriate insurance coverage can help reduce these risks. 

Landlord insurance, also known as rental property insurance, is designed specifically for property owners renting out their homes, apartments, or commercial spaces. Unlike homeowners insurance, which primarily covers owner-occupied properties, landlord insurance provides essential protections for rental properties, including property damage, liability coverage, and loss of rental income.

In this guide, we’ll explore how to choose the right landlord insurance policy, helping you find the best coverage to protect your investment.

Different Types of Landlord Insurance Policies

1. DP-1, DP-2, and DP-3 Policies

• DP-1 (Basic Form):

This is the most basic and affordable option for landlord insurance. It covers a limited range of named perils—specific events listed in the policy. These typically include hazards like fire, vandalism, wind damage, and hail. However, it’s important to note that DP-1 policies do not provide coverage for loss of rental income. You won't be compensated for the lost rent if your rental property becomes uninhabitable due to a covered peril. It’s an excellent option for landlords looking for budget-friendly coverage but willing to accept more risk.

• DP-2 (Broad Form):

This policy offers a broader range of coverage than the DP-1. It includes all the perils covered under the DP-1 form, such as fire and vandalism. Still, it adds additional protection for falling objects, freezing pipes, accidental water damage (like burst pipes or plumbing issues), and more. This makes it a more comprehensive option for landlords who want additional protection, particularly in areas where these risks are more likely. Like DP-1, it does not generally cover loss of rental income unless additional endorsements are added.

• DP-3 (Special Form):

The DP-3 policy provides the highest level of coverage and is typically the most costly. It offers all-risk protection, which covers almost all potential risks unless expressly excluded in the policy, such as earthquakes or flooding. This policy is ideal for landlords seeking extensive coverage, including protection for loss of rental income in specific cases. With a DP-3 policy, landlords can have peace of mind, knowing that their property and rental income are safeguarded against a wide range of potential risks.

2. Commercial Landlord Insurance vs. Residential Landlord Insurance

• Commercial Landlord Insurance:

This type of policy is designed for landlords who rent out commercial properties, such as office buildings, retail spaces, or warehouses. Commercial landlord insurance provides coverage for risks unique to commercial properties, such as damage caused by employee negligence, business interruption, or tenant-caused damages. Commercial policies typically offer higher liability limits due to the increased risk of financial loss, and they may also cover loss of income from tenants who fail to pay or experience business interruptions. Commercial properties usually have higher valuation and risk factors, so this insurance often involves a more tailored approach based on the specific type of business occupying the space.

• Residential Landlord Insurance:

Residential landlord insurance is designed for property owners renting out single-family homes, multi-unit apartments, or other residential properties. This policy generally provides coverage for property damage, liability, and loss of rental income if the property becomes uninhabitable. Residential policies are designed to protect the physical structure of the rental property and any property owner liability that could arise from tenant-related incidents, like accidents or injuries on the premises. Some residential policies can include additional coverage for personal property or tenant-related damage, mainly if the landlord provides furnished units. This type of insurance is generally less expensive than commercial insurance due to the lower risk profile of residential properties.

Key Factors to Consider When Choosing Landlord Insurance

1. Coverage Options

Landlord insurance policies offer different types of coverage. Understanding what is included in a policy can help you make an informed decision. Standard coverage types include:

• Property Damage Coverage – It safeguards against damages caused by fire, storms, vandalism, and other covered risks.

• Liability Protection – This covers legal costs if a tenant or visitor is injured on your property.

• Loss of Rental Income – Compensation is offered if your property is uninhabitable due to a covered event.

• Additional Coverages – Some policies provide optional coverage for detached structures, appliances, and certain natural disasters.

2. Cost and Deductibles

Insurance premiums and deductibles can vary widely, so it’s essential to compare different policies and consider the following factors:

• Annual Premium Costs – These typically range from $1,000 to $3,000 annually, depending on factors such as the property’s location, size, and the level of coverage.

• Deductibles—While opting for a higher deductible can reduce your premium costs, it also means you'll face higher out-of-pocket expenses when making a claim.

• Discounts – Some insurers offer discounts for factors like owning multiple properties, installing safety features, or having a long-term policy with the provider.

3. Reputation and Customer Service

A company’s reputation matters when it comes to handling claims. Look for insurers that have:

• Positive customer reviews

• Reliable claims processing

• Strong financial stability

• 24/7 customer support

4. Additional Protection for Landlords

Some policies offer specialized coverage for unique landlord risks:

• Tenant Damage Coverage – Protects against damage caused by renters.

• Eviction Protection – Covers legal fees if you need to evict a tenant.

• Short-Term Rental Insurance – Ideal for vacation rental property owners.

• Natural Disaster Protection- This may include coverage for floods, earthquakes, and hurricanes (usually requires an additional policy).

Tips for Lowering Landlord Insurance Costs

• Bundle Policies: Many insurers offer discounts when bundling landlord insurance with homeowners or umbrella insurance policies.

• Improve Security: Installing burglar alarms, fire sprinklers, and deadbolt locks can qualify for lower premiums.

• Choose a Higher Deductible: Opting for a higher deductible can reduce premium costs, though it increases out-of-pocket expenses when filing a claim.

• Maintain Good Credit: Insurance companies may offer landlords with good credit scores lower rates.

• Screen Tenants Carefully: Fewer claims due to responsible tenants can help keep insurance costs manageable.

Real-Life Scenarios Where Landlord Insurance Helped

1. Fire Damage Protection

A landlord in Florida had a rental home catch fire due to an electrical issue. Thanks to their landlord insurance policy, the insurer covered the property’s repair costs and provided the loss of rental income until the home was restored.

2. Liability Protection

A tenant in California slipped and fell on an icy walkway, leading to a lawsuit against the landlord. The liability portion of their landlord insurance covered legal fees and medical expenses, preventing a financial setback.

3. Vandalism Coverage

An absentee landlord in New York discovered their rental property had been vandalized. The insurance policy covered the cost of repairs, saving the landlord thousands of dollars.

Standard Exclusions in Landlord Insurance

Landlord insurance covers many risks, but there are standard exclusions:

• Tenant’s Personal Belongings: Landlord insurance does not cover tenants' belongings. Tenants should have their own renter’s insurance.

• Routine Maintenance & Wear and Tear: Structural issues due to normal wear and tear are not covered. Landlords must handle regular maintenance themselves.

• Certain Natural Disasters: Standard policies often exclude earthquakes and floods, requiring separate policies for protection.

Average Cost of Landlord Insurance by State

Prices vary based on location, property type, and coverage options. The average premium costs are sourced from industry reports, insurer rate filings, and state insurance departments.

Landlord insurance is an essential investment for property owners. It protects against financial loss due to property damage, liability claims, and loss of rental income. Choosing the right policy involves comparing coverage options, costs, and customer service ratings. With InsureHopper, you can effortlessly compare multiple landlord insurance providers and find a policy that best suits your needs. Our platform ensures a fast, hassle-free experience, helping landlords secure the best rates from multiple carriers.

Get started with InsureHopper today and find the best landlord insurance policy for your rental property!

FAQs

What is landlord insurance, and how does it differ from homeowners insurance?

Landlord insurance covers rental properties and includes protections for property damage, liability, and rental income loss. Homeowners insurance is designed for owner-occupied residences and does not cover tenant-related risks.

Does landlord insurance cover tenant damage?

It depends on the policy. Some policies cover tenant-caused damage due to accidents, while intentional damage may require additional coverage.

How much does landlord insurance typically cost?

The cost varies based on property location, coverage options, and insurer. Landowner insurance costs 15-25% more than standard homeowners insurance.