Rental Property Insurance: What is More Expensive Homeowners Insurance or Landlord Insurance?

Due to the amount of risks it covers and the simple fact that it is insuring someone who isn’t the primary homeowners mistakes, landlord insurance will be a little more expensive than a standard homeowners insurance policy. Also the data shows that homeowners of a primary residence have fewer claims than a home that is used as a rental. Another factor to keep in mind is that rental property insurance usually comes with higher limits than a homeowners insurance policy. Liability coverage can go up to $1,000,000 as limit and beyond. This is used to protect the landlord from lawsuits, medical fees and legal fees if someone is hurt or injured on the property.

What are some of the other factors that may help determine my landlord insurance rate?

• Square footage of home and additional structures, such as a free standing garage or fence.
• Age and construction materials used to build the home, such as brick or block versus frame and stucco construction.
• Likelihood of natural disasters in a city or region, such as tornadoes, wildfires, hurricanes, or earthquakes.
• Crime rate in the area and overall neighborhood rating including risks and benefits such as school district quality, employment rates, and home values.

Landlord Insurance Discounts

Although most landlord insurance providers do not have the same discounts for standard insurance policies as they do for rental property insurance, there are still ways for you to save money. Below are a few ways to save on your landlord insurance coverage:

• Maintain the property, keeping it free of hazards such as sidewalk cracks and mold.
• Install safety devices such as hard-wired smoke detectors, child-safe window hardware, and burglar alarms.
• Review your property’s valuation annually and update the rental property profile to include any safety-related improvements.
• Increase the deductible amount of the landlord insurance policy.
• Pay the landlord insurance premium annually instead of monthly.
• Avoid filing a landlord insurance claim unless the loss is major.
• Combine multiple rental properties under a single landlord insurance policy with the same insurance carrier.
• Work with an insurance broker like Eugene C Yates Insurance Agency who specializes in rental property and real estate investors.

Types of Landlord Insurance Coverage

Rental property insurance will fall into 3 different levels, which are:

DP-1:

The DP-1 policy is the most basic and least expensive type of landlord insurance. A DP-1 policy (or dwelling policy) normally only covers loss or damage caused by a peril – such as a fire, earthquake, or wind storm. If the peril is not specifically stated in the policy a landlord may not be covered. Reimbursement is often made based on cash value, which is determined based on the depreciated value of the covered damage after accounting for wear and tear.

DP-2:

A DP-2 policy offers upgraded coverage that extends the range of perils and provides coverage based on replacement cost instead of cash value. Perils still need to be specifically stated in the policy, such as vandalism or burglar coverage that may be included in a DP-2 policy but not in a DP-1.

DP-3:

Rental property owners looking for the most comprehensive coverage of landlord insurance often opt for a DP-3 policy. Although the most expensive, this policy provides the most extensive coverage against perils unless they are specifically excluded in the policy. Reimbursement for covered perils is also made on replacement value versus cash value.

Extra Landlord Insurance Coverages

Most rental property insurance policies can be customized to fit what you need for protection. 

• Vandalism coverage if the property is vandalized while vacant , a type of damage typically not covered by a traditional landlord insurance policy.
• Burglary coverage for items belonging to a landlord that are stolen during a break-in, such as power tools or landscaping equipment used for the rental property.
• Rental property under construction covers losses incurred when a home is being gutted or renovated until it is ready to be occupied.
• Building code coverage in a landlord insurance policy provides reimbursement for the additional cost of upgrading items like plumbing or electrical to meet current city or county codes if repairs or replacement are necessitated due to damage.