Is Home Insurance for a Rental Property More Than for a Primary Residence?

You may find damage every time a renter moves out.

You may find damage every time a renter moves out.

Homeowners insurance is usually cheaper than landlord insurance. Insurance companies assume that if you live in a home you own, you're going to take good care of it. Renters can walk away if they break a window or smash a hole in the wall. To cover the added risk, you pay an added price.

Costs

Typically you pay 15 to 20 percent more for landlord insurance than if the same house was your personal home. For example, if you pay $800 a year on your home, then move and rent the place out, you might find yourself paying about $960 instead. Although you pay more, you may not get coverage on as many types of damage as with homeowners insurance. Landlord policies do cover major threats, though, such as wind, fire, ice and theft.

Dwelling Protection

Landlord insurance is also known as a "dwelling protection" policy. You can buy from a DP-1 to DP-3 policy. DP-1 usually just pays the cash value of whatever you lose, which for older property may not be much. DP-3 pays replacement value, a better deal. In addition to protection for the house, DP policies cover your furniture and appliances, other buildings on the property and offer some liability protection. Some policies also make up for lost rental income while the house is being repaired.

Added Insurance

If your policy doesn't provide lost-income coverage, you can buy that for maybe another $50 a year. You can also buy a landlord protective policy that pays for repairs if the air-conditioning or the furnace break down or die. While DP policies do cover liability -- medical bills for injuries and court damages if you're sued -- it may not be enough for a serious incident. A $300-a-year umbrella policy can give you $1 million in liability coverage. None of your insurance covers your renter's possessions. For that she'll need to buy renters insurance.

Basement Apartment

If you're not renting out an entire property -- just your basement or your garage apartment, say -- you don't need a DP policy. Paying extra for "unit rented to tenant" coverage extension does the trick. Do not assume, however, that just because it's your home you don't need to tell the insurer. If you keep quiet and later you have to file a claim involving the rental, the company can refuse your claim.

About the Author

Author of two film reference books, "Cyborgs, Santa Claus and Satan" and "The Wizard of Oz Catalog." Published in Air & Space, Backpacker, Newsweek, The Writer, and multiple trade journals (can fax samples if requested, don't have them available digitally)

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