If your home catches fire or your dog bites the neighbor's kid, homeowners insurance often protects you. If you own a rental property, though, you need even more protection: You can end up liable for your tenant's injuries, or if your tenant injures someone else. Your renter may trash the house, as he doesn't own it. That's why landlord insurance typically costs 15 to 20 percent more than a homeowner policy would.
An HO-3 homeowner policy covers your house and its contents against all "perils" not specifically exempted. Flood damage, for example, is never covered. The policy also provides coverage to pay medical bills if someone outside your family is injured on your property. If the injury becomes a court case, the policy pays court costs and damages as well. Of course, the payouts are limited by the amount of coverage you bought. Above the maximum, you're on your own.
Landlord insurance often doesn't cover as many perils as a homeowners policy, but it covers the major ones, such as fire, ice and wind damage. Like homeowners insurance, a landlord policy usually covers the house, other buildings on the property and the owner's possessions (never the renter's). The policies also provide liability coverage. They may include payments to cover lost rental income if the house becomes too damaged to live in until you have it repaired.
If you run a home business, your homeowner policy gives minimal or no protection to your business assets. People visiting you on business aren't covered by your liability. If you rent out part of your house, you have an increased liability your regular policy also may not cover. You can pay more to add coverage to your homeowner policy or take out an umbrella policy, which offers you extra liability coverage. No policy will protect you, however, if you deliberately injure or assault someone else.
Added Landlord Insurance
Unlike homeowner policies, landlord insurance is designed to cover you in a business situation. Even so, increasing landlord insurance liability coverage is a good idea if you have lots of assets. The Bankrate website says $1 million in liability for a rental is a safe level. That much insurance only costs, on average, $200 to $300 more a year than $500,000 in coverage. If you have multiple rentals, an umbrella policy offers you extra protection. This costs an average of $250 to $300 a year, but, as with homeowner umbrella policies, it offers much greater coverage than regular insurance.
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