In this new post we will look at homeowners insurance vs landlord insurance. Being a landlord implies different risks with respect to rented homes, which is why you need different insurances that protect your needs.
Owners of a rental property must understand the differences between these two insurance policies, as they vary in several points and will act differently for each type of circumstance.
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Table of Contents
Differences Between Homeowners Insurance Vs. Landlord Insurance
Many individuals understand the importance of having a homeowners insurance as a financial safeguard against property damage.
However, this type of insurance may be insufficient for landlords who rent out part or an entire property. Therefore, below, we will show in detail the differences between homeowner’s insurance and landlord insurance:
1# Homeowner’s Insurance Often Incorporates Coverage For The Insured’s Personal Property
Homeowners are responsible for their homes and the contents inside. While homeowner’s insurance provides coverage to reimburse the cost of renovating the home after an incident, landlord insurance does not.
This means that landlord insurance:
- Only includes personal property, and
- Is limited only to covering the structure of the rented property.
Therefore, tenants’ personal belongings are not covered in landlord insurance, prompting landlords to require tenants to obtain renter’s insurance.
Although landlord insurance does not cover personal belongings, specific items can be added for an additional fee, such as:
- Appliances, or
- Gardening equipment provided by owner.
2# Homeowner’s Insurance Covers The Primary Residence, While Landlord Insurance Covers Rental Properties
Homeowner’s insurance is designed to protect the investment of those who live in their homes, offering comprehensive coverage for many scenarios. Typically, events covered by these policies include:
- Damage caused by natural forces (lightning, wind, snow and rain),
- Accidents, and
- Certain types of water damage, such as burst pipes. However, it does not cover damage from floods or earthquakes and generally excludes property that is not part of the policyholder’s property.
On the other hand, landlord insurance does not require that the policyholder reside at the covered property. Additionally, homeowners may have separate policies for multiple properties.
As if that were not enough, landlord insurance focuses on items owned by the landlord, addressing needs such as:
- Repair, or
- Replacements after a covered event.
This policy shares similarities with homeowner’s insurance, but includes coverage for accidental damage caused by tenants.
3# Homeowners Insurance Includes Loss Of Use Coverage, While Landlords Can Opt For Loss-Of Rent Coverage
Both insurances usually cover expenses during the property’s disqualification due to repairs or reconstruction. The difference, however, is that homeowner’s insurance typically offers coverage for loss of use.
These typically cover temporary living expenses if the homeowner is required to move out while repairs are made. On the other hand, landlord insurance covers loss of rent in similar situations, protecting the landlord from reduced income.
4# Homeowners Insurance Does Not Include The Tenant’s Belongings, Which Is The Reason For Having Renters Insurance.
Unlike homeowners insurance, landlord insurance does not cover tenants’ personal property, putting their belongings at risk in the event of a loss.
Renters insurance is designed to fill this gap, allowing to:
- Protect tenants’ personal items,
- Provide coverage for temporary living expenses during repairs, and
- Provide liability coverage.
Landlords often require tenants to have this insurance, specifying in the lease who is responsible for covering the costs.
In fact, if the contract does not require it, this policy is advisable for tenants, since underestimating the value of their belongings could make it difficult to replace the belongings.
5# Both Insurances Usually Cover The Structure Of The Home, As Well As detached Structures
Structural coverage is essential for both insurances, especially in case a covered situation occurs. For example, branches falling on a shed due to a storm. That said, both policies will likely cover repair costs.
Also included are:
- Windows broken by hail, or
- Walls damaged by fire.
This protection is vital to safeguard the owner’s investment, especially in cases where the structure has been severely damaged or destroyed by fire. This is all because rebuilding or replacing can be a huge expense.
6# Both Insurances May Include Personal Liability Protection Coverage And Medical Payments For Guests Who Suffer Injuries On The Property
When an individual has a home injury due to a damaged property, all expenses fall under the category of personal liability protection. Typically, these types of situations are covered by both types of policies.
Personal liability protection coverage protects the insured from:
- Costs associated with medical expenses for injuries sustained by visitors on the property, or
- Repair costs for damage caused.
This coverage generally has a limit, and the policyholder may choose to increase or improve those limits depending on the property or accident risk. For example, on properties with swimming pools or diving boards, where injuries are more common, it may be advisable to obtain additional coverage.
If you arrived to our blog on homeowners insurance vs. landlord insurance by searching for the topic, perhaps our blog on “Contingent vs. Pending in real estate” may also be of interest to you.
What Does Homeowners Insurance Cover?
This home policy provides the following coverage:
Loss Of Use
Provides financial assistance when the residence becomes uninhabitable due to a covered peril. For example:
- A fire, or
- Significant storm damage.
This coverage helps manage additional living expenses, such as hotel accommodations, meals, and other costs above your usual expenses. All of this will be while the home is being repaired or rebuilt.
Belongings And Personal Property Coverage
Personal property coverage acts as a safeguard for individuals’ belongings in the home, protecting items such as:
- Electronic products,
- Furniture, and
- Small decorative elements like those adorning your bookshelves.
So, if a fire damages possessions, the homeowner’s insurance will cover the cost of repair or replacement up to the insurance limit.
Liability coverage safeguards against:
- The financial implications resulting from accidental injuries, or
- Damage to property caused by oneself or household members.
It usually also includes coverage for medical expenses and costs associated with legal defense.
This policy protects the main structure of the house, covering the costs of reconstruction or repair in the event of a disaster. Such coverage includes:
- The main house,
- Detached structures,
- Interior walls,
- Permanent fixtures, and
- Appliances installed.
What Does Landlord Insurance Cover?
Landlord insurance offers the following coverage:
Loss Of Rent coverage
It includes coverage for loss of rent, which protects rental income in situations where the home became uninhabitable due to risks already covered.
This coverage is key in ensuring the continuity of rental income, even in periods of:
- Repair, or
Additionally, if a fire damages the rental property and several months have passed with repairs, the coverage compensates for the income you would have received during this period.
Property Structure Coverage
This policy covers the structural integrity of a rental property, including both the main building and independent structures. For example:
- Garages, or
It should be noted that the physical structure includes fundamental elements of the building, such as:
- Walls, and
- Built-in appliances.
So, if a storm causes a tree to fall on a rental home and cause serious damage, insurance will cover the costs.
Protects against legal and medical expenses caused by injuries that occur on the property due to maintenance problems. This coverage is essential in the policy as it reduces the risk of potential lawsuits and associated costs.
For example, if a tenant or visitor is injured by a slippery hallway in the home, coverage will cover medical costs and may even cover legal fees.
What Does Landlord Insurance Not Cover?
Although landlord insurance provides extensive coverage, it is equally important to understand what it does not cover:
- Personal belongings: Does not cover the personal belongings of tenants. Therefore, if a fire destroys the tenant’s furniture, the policy will not cover those losses.
- Certain natural disasters: As a general rule, events such as earthquakes, volcanic activity and erosion are not covered.
- Negligence and maintenance issues: If damage occurs due to negligence or lack of maintenance, the policy will not cover the costs.
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When Would You Need Landlord Insurance And When a Homeowner’s Insurance?
Although these policies are not legally mandatory, they both play a vital role in protecting assets. Therefore, if you have a mortgage on your home, the lender will likely require homeowner’s insurance to protect your financial interests.
On the other hand, landlord insurance is highly recommended for owners who rent out their properties. This is because it covers possible damages and liabilities, ensuring financial stability.
To better understand this, we will detail the following:
When To Consider Homeowner’s Insurance:
- The property is the main residence,
- There is a mortgage on the property,
- Protection of personal belongings is sought, and
- It is desired to have liability coverage for incidents on the property.
When To Consider Landlord Insurance:
- You are an owner of a property that is rented to tenants,
- The property is not a primary residence,
- You are dependent on rental income,
- Seeking protection against liability claims related to rental property is a priority, and
- Significant investments have been made in the rental property you want to protect.
Are you having problems with your landlord over an illegal apartment? Find out what you can do in our blog: “Can I sue my landlord for illegally renting an apartment.”
Length of rental agreement
Individuals who intend to rent their property temporarily for specific events may have some protection under their landlord’s insurance. This is as established by the Insurance Information Institute (III).
In such cases, this policy could cover damage from risks such as fire or theft during occasional rentals. However, it is important to note that there may be limitations if they do not reside in the house.
In contrast, those who plan to rent their home on an ongoing basis are likely candidates for landlord insurance.
Frequently Asked Questions Regarding Homeowners Insurance Vs. Landlord Insurance
Generally, these insurances do not extend to properties intended for rental. To do this, owners must purchase insurance that does protect the physical structure of the rental property, as this insurance is designed for owner-occupied properties.
Landlords often opt for landlord insurance instead of homeowner’s insurance to ensure the protection of a rental property. However, it is crucial that tenants get renters insurance to protect their personal belongings within the rental property.
Yes, landlord insurance costs approximately 25% more than homeowners insurance. This is due to the increased risks associated with rental properties.
Choosing the best homeowners insurance and policy varies depending on your needs and budget. Therefore, comparing prices and requesting quotes from various companies is a smart decision when making a choice.
As evidenced in this blog on homeowners insurance vs. landlord insurance, basic home insurance does not meet the needs of a rental home. Instead, it is recommended that you obtain specific insurance to provide adequate coverage for a rental home.
If you reside in New Jersey and are looking for legal advice on matters related to real estate procedures, do not hesitate to contact our firm. With more than 10 years of successful experience, Curbelo Law is a reference among the Spanish and English speaking community of NJ in the purchase and sale of real estate and many other real estate transactions.
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