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Landlord vs Homeowners Insurance: What’s the Difference?

Hello, property and potential property owners! Welcome to the RPM Distinguished Care blog, where we provide practical advice about property management! If you’re a return visitor, welcome back. We sincerely appreciate your support! RPM Distinguished Care specializes in managing successful rental properties in and around the Charleston area. We’re here to make your lives easier by giving you the resources you need to maximize profitability and have a successful rental property. We provide comprehensive property management services at every conceivable level. From advertising and marketing, to responding to applications, to inspecting and maintaining properties–there’s nothing we do not do. Further, we ensure tenant compliance, handle necessary evictions, and report directly back to you about revenue and profit potentials. We aim to make owning rental property as easy for you as possible, for as little money as possible. Check out the rest of our site to meet our team and discover what makes RPM Distinguished Care the best property management company in Charleston!


Our last article discussed ways that you can decorate and personalize your space as a renter. When renting a house, apartment, or other space, you typically cannot customize the space completely due to the fact that you do not own the property. Despite this, there are many things you can do to personalize and “upgrade” your rental space, including replacing cabinet handles and doorknobs, adding artwork, and more! If you are interested in learning more about how to customize your rental space, we encourage you to check out our last post!


Today, we’ll be talking about landlord insurance and homeowners insurance. When you are renting out your home or any other property, you’ll want to have a good insurance policy in place. But with so many policies out there, how do you know which one to choose? Choosing the right insurance policy will keep you protected in various situations. If you are interested in learning about landlord and homeowners insurance, and the differences between them, you’re in the right place! Let’s get right into it.


The first thing you’ll want to consider is whether or not the property serves as your primary residence. If so, you’ll likely want to get homeowners insurance. However, if you’re going to rent out the property, or a second home, for an extended period of time, you’ll want landlord insurance. Let’s take a closer look at the differences between the two.


Homeowners insurance covers more than just the home itself– It covers your personal property as well as legal and medical payments if someone is injured at your home and you are found liable. It also covers medical payments of others, regardless of who is at fault. When it comes to personal property, this includes things like clothes, furniture, and electronics by up to 50% of your home’s insured value. Homeowners insurance may help repair or replace your home or personal property if they are damaged by things such as a fire or theft. It typically covers other structures on your property, but this can depend on the coverage plan that you select. Homeowners insurance also has loss-of-use coverage, which pays for your additional living expenses if a covered disaster causes you to flee your home temporarily. 


Sometimes known as rental property insurance, landlord insurance typically covers the building itself and other structures on the property. Unlike homeowners insurance, landlord insurance includes protection like loss-of-income or loss-of-rent coverage. What exactly does this mean? If your rental property is damaged and cannot be rented out after a disaster (if it is covered by the insurance policy), this type of policy will essentially pay rent on behalf of your tenants. This is sometimes known as fair rental value. Personal property coverage is typically not included in landlord insurance, but your insurance company may offer coverage for appliances for an additional fee. 


It is important to note that landlord insurance does not cover your tenant’s belongings. If your tenants want to protect their personal belongings, they’ll need to get a renter’s insurance policy. Sometimes, a landlord or property owner will require that tenants get renter’s insurance so there is no confusion about the landlord’s liability. This is something you would want to include in your lease.


The personal property coverages and loss-of-rent and loss-of-use coverages are the key differences between homeowners and landlord insurance. Additionally, landlord insurance is often more expensive because landlords require more protection for tenant-occupied property. To be specific, landlord insurance tends to cost about 25% more than homeowners insurance. Homeowners insurance requires that the policyholder is a resident of the covered property, while landlord insurance does not. This is another reason why the insurance you select matters– If you need to file a claim for your rental property, but have homeowners insurance, you may find that your claim is denied. 


If you decide you want to rent your property out on a regular basis, we recommend that you opt for landlord insurance. If you already have a homeowners insurance policy and decide to rent your property out, speak with your insurance provider so they can help determine the best policy for you. There are different types of landlord insurance, as well. Generally, there are three types of  “dwelling” policies: DP1, DP2, and DP3. 


  • DP1: This is the most basic insurance policy available. It covers damage from nine perils, or dangers, including fire and lightning, internal and external explosions, windstorms, hail, smoke, aircrafts, riots, vehicles, and volcanic explosions. As you can see from the list, things like water damage are not covered by a DP1 policy, which is something to think about– It may be worth spending more to get another policy with extra coverage. This policy is best to cover a vacant property, or if you are on a tight budget.
  • DP2: Offering more protection than the last, a DP2 policy typically includes coverage for things like electrical damage, freezing pipes, vandalism, and water. It also includes the replacement cost value (RCV) of your property. This means that if your tenant severely damaged your property, depreciation isn’t factored into the building’s rebuild cost. 
  • DP3: This is the most comprehensive type of insurance policy out there. This policy is often known as an “open peril policy” because it includes coverage from almost all perils other than ones explicitly mentioned in the policy– You’ll want to read the fine print! This includes coverage for things like power failure, mold, and governmental action. It often covers personal liability as well. 


While any coverage is better than none at all, we definitely recommend opting for a DP3 policy if you can. This gives you the most protection in the event of a natural disaster or any other peril. It is widely considered the best form of insurance for rental properties in the United States.


As you can see, landlord and homeowners insurance are similar but have key differences. The type of policy you choose can have a major impact on your wallet down the road if there is a disaster and your claim is not covered. Therefore, it is extremely important to choose the right type of policy for your property. Here’s the bottom line: If you are using the home as your primary residence, opt for homeowners insurance. If you are renting out for extended periods, or to multiple people over an extended period, opt for landlord insurance.


We hope you found this article helpful. If you are a rental property owner looking for assistance in managing your property, feel free to reach out to us! RPM Distinguished Care specializes in residential property management and offers a range of services including communication, marketing, and advertising, thorough tenant screening and selection, full-service leasing, timely rent collection, regular evaluations, cost-effective and reliable maintenance, strict and compliant evictions, and comprehensive accounting. We utilize an online portal for owners to keep track of their property, including access to reports and financial statements. With over 30 years of experience, we know how to keep your property at its best. We believe in full-service and comprehensive property management. That’s why we take the time to understand each of our clients and help identify their most closely-held goals. Let us give you peace of mind that your property is in good hands. Use our website to request your free assessment and meet with our expert team! Thank you for taking the time to read this article and we hope to hear from you soon! See you next time!


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