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Landlord Insurance Guide: Coverage Types, Costs, and What You Actually Need
You buy a rental property. You already have [homeowners insurance](/blog/homeowners-insurance-complete-guide). You're covered, right?
Wrong. Your homeowners policy explicitly excludes properties you don't live in. The moment you rent out a property, your homeowners insurance won't pay claims on it. Full stop.
Landlord insurance — also called rental dwelling insurance or dwelling fire insurance — is a separate policy designed specifically for properties you rent to others. It's not optional. It's the foundation of protecting your rental investment.
This guide covers every type of landlord insurance coverage, what it costs, and how to build a policy that actually protects you.
Landlord Insurance vs. Homeowners Insurance
They look similar on the surface. Both cover your building, both include liability protection, both cover certain perils. But the differences matter:
| Feature | Homeowners Insurance | Landlord Insurance |
|---|---|---|
| Covers owner-occupied property | ✅ | ❌ |
| Covers tenant-occupied property | ❌ | ✅ |
| Building coverage | ✅ | ✅ |
| Personal property | Your belongings | Your property at the rental (appliances, tools) |
| Liability | ✅ | ✅ |
| Loss of use | Pays for your [temporary housing](/blog/dscr-loan-corporate-housing) | Pays for lost rental income |
| Typical cost premium | Base rate | 15-25% more than homeowners |
Landlord insurance costs more because rental properties are higher risk. Tenants are statistically less careful with property they don't own. Vacancy periods increase risk of vandalism and undetected damage. And the liability exposure is greater because you owe a duty of care to people living in your building.
The Three Levels of Landlord Insurance: DP-1, DP-2, and DP-3
Landlord insurance comes in three standard forms, each offering progressively more coverage:
DP-1: Basic Form (Named Perils, Actual Cash Value)
The most basic and cheapest option. Covers only specifically listed perils:
- Fire and lightning
- Internal explosion
- Windstorm and hail (sometimes excluded in coastal areas)
- Riot and civil commotion
- Aircraft and vehicle damage
- Smoke damage
- Volcanic eruption
- Vandalism and malicious mischief (only if the property is occupied)
Key limitation: DP-1 pays on an actual cash value (ACV) basis, meaning it deducts depreciation. If your 15-year-old roof is destroyed, you get the depreciated value of a 15-year-old roof — not the cost to install a new one.
Who it's for: Landlords with low-value properties, properties with existing damage issues that make DP-3 hard to get, or landlords looking for the absolute minimum coverage to satisfy a lender.
DP-2: Broad Form (More Named Perils, Replacement Cost)
Covers everything in DP-1 plus additional named perils:
- Falling objects
- Weight of ice, snow, or sleet
- Accidental discharge of water or steam from plumbing, HVAC, or appliances
- Freezing of plumbing, HVAC, or other household systems
- Sudden and accidental damage from electrical current (power surges)
- Accidental tearing, cracking, burning, or bulging of pipes and other systems
Key improvement: DP-2 pays on a replacement cost basis for the building. If your roof is destroyed, you get the full cost to replace it, regardless of age.
Who it's for: A solid middle-ground option for landlords who want reasonable coverage without paying DP-3 premiums.
DP-3: Special Form (Open Perils, Replacement Cost)
The gold standard. Instead of listing what's covered, DP-3 covers all perils except those specifically excluded.
Common exclusions in a DP-3 policy:
- Flood (separate policy needed)
- Earthquake (separate policy or endorsement)
- Intentional damage by the insured
- War and nuclear hazard
- Ordinance or law (can be added by endorsement)
- Mold (can sometimes be added by endorsement)
- Wear and tear, deterioration, inherent defect
Key advantage: If something damages your property and it's not on the exclusion list, it's covered. This means you're protected against unusual events that DP-1 and DP-2 would miss.
Who it's for: Any landlord who wants comprehensive protection. If you can afford it, get DP-3.
Policy Comparison at a Glance
| Feature | DP-1 | DP-2 | DP-3 |
|---|---|---|---|
| Coverage approach | Named perils only | Named perils (broader list) | All perils except exclusions |
| Building valuation | Actual cash value | Replacement cost | Replacement cost |
| Contents coverage | ACV, named perils | ACV, named perils | ACV, named perils |
| Number of covered perils | ~11 | ~17 | Unlimited minus exclusions |
| Typical annual cost | $800–$1,200 | $1,000–$1,500 | $1,200–$2,500 |
Note: Contents coverage for your personal property at the rental (appliances, maintenance tools) is typically ACV even on DP-3 policies, though some insurers offer replacement cost endorsements.
Core Coverage Components
Every landlord insurance policy has several coverage components. Here's what each one does and how to size it:
Coverage A: Dwelling
Covers the physical structure of your rental property — walls, roof, foundation, built-in fixtures, permanently attached systems (plumbing, electrical, HVAC).
How much: Enough to rebuild the structure from scratch. This is the replacement cost, not the market value. A $300,000 home might cost $250,000 to rebuild, or a $200,000 home in a high-labor-cost area might cost $350,000 to rebuild. Your insurer should calculate this, but verify it using construction cost estimators.
Common mistake: Insuring for the purchase price instead of the rebuild cost. If you bought a home for $180,000 but rebuilding costs $240,000, you're underinsured by $60,000.
Coverage B: Other Structures
Covers detached structures on the property — detached garages, sheds, fences, retaining walls, driveways, walkways.
How much: Typically set at 10% of Coverage A automatically. If you have significant other structures (large detached garage, pool house), increase this.
Coverage C: Personal Property
Covers property you own that's kept at the rental for maintenance or tenant use — appliances (if you provide them), lawn equipment, tools, cleaning supplies.
This does NOT cover tenant belongings. Tenants need their own renter's insurance for their personal property.
How much: Make an inventory of what you keep at the property. Common items include refrigerator ($800-$2,000), washer/dryer ($1,500-$3,000), stove ($500-$1,500), lawn mower ($300-$800), and miscellaneous tools ($500-$2,000). Most landlords need $5,000-$15,000 in personal property coverage.
Coverage D: Fair Rental Value (Loss of Rents)
Covers lost rental income when a covered peril makes your property uninhabitable. If a fire damages your rental and it takes four months to repair, Coverage D reimburses the rent you would have collected during that period.
How much: Most policies set this at 12 months of fair rental value. If your property rents for $2,000/month, Coverage D would provide up to $24,000. Some policies cap it at a specific dollar amount; others cap it at a time period. Make sure it covers a realistic repair timeline — major damage can take 6-12 months to repair.
Coverage E: Liability
Covers legal liability when someone is injured on your property or your property causes damage to others. Pays for:
- Medical bills of the injured person
- Legal defense costs (even if the lawsuit is frivolous)
- Court judgments and settlements
- Damage your property causes to others (e.g., a tree falls on a neighbor's house)
How much: Minimum $500,000. Ideally $1 million. And then add an umbrella policy on top of that for $1 million or more. Liability claims from rental properties regularly exceed $500,000.
Coverage F: Medical Payments
Covers minor medical expenses for people injured on your property regardless of fault. No lawsuit needed. If a tenant's child falls on your stairs and needs an ER visit, Medical Payments covers the bill up to the policy limit.
How much: Typically $1,000-$5,000 per person. This isn't meant for serious injuries (that's what liability coverage handles). It's designed for small injuries that you want to handle quickly and avoid lawsuits.
Essential Endorsements and Add-Ons
A base landlord policy has gaps. These endorsements fill them:
Guaranteed Replacement Cost
Standard replacement cost coverage has a cap — your Coverage A limit. If you're insured for $250,000 but rebuilding costs $290,000 due to construction cost inflation, you're short $40,000. Guaranteed replacement cost (or extended replacement cost at 125-150% of Coverage A) covers the overage.
Cost: 5-10% premium increase. Worth every penny.
Ordinance or Law Coverage
If your building is damaged and must be rebuilt, it may need to comply with current building codes, not the codes that existed when it was originally built. Bringing a building up to code can add 20-40% to rebuilding costs. Standard policies don't cover this.
Cost: 5-15% premium increase. Essential for older buildings.
Water Backup / Sewer Coverage
Standard landlord policies don't cover damage from sewer or drain backups. This endorsement adds coverage, typically $5,000-$25,000.
Cost: $50-$200 per year. If your property has a basement, get this.
Rent Guarantee / Eviction Coverage
Some specialty insurers offer coverage for unpaid rent due to tenant default and legal costs for eviction proceedings. Not common in standard policies.
Cost: Varies widely. Usually a separate policy or endorsement.
Equipment Breakdown
Covers mechanical and electrical breakdown of systems like HVAC, water heaters, electrical panels, and appliances. Standard policies only cover damage from external perils, not equipment failure from age or defect.
Cost: $50-$150 per year. Valuable for properties with aging mechanical systems.
Vacancy Coverage
Standard landlord policies restrict or void coverage if the property is vacant for 30-60+ consecutive days. A vacancy endorsement extends coverage during vacant periods — important between tenants or during renovations.
Cost: Can increase your premium by 25-50% for the vacancy period. Expensive, but cheaper than an uncovered loss.
How Much Does Landlord Insurance Cost?
National Averages
The average landlord insurance policy costs approximately $1,400-$2,000 per year for a single-family rental property with DP-3 coverage. But "average" is nearly meaningless — your cost depends on:
Factors That Determine Your Premium
Property location — The biggest factor. Insurance in Florida, Louisiana, Texas, and Oklahoma costs 2-4x more than in Utah, Oregon, or Vermont due to natural disaster risk and state regulations.
Property value / rebuild cost — Higher value = higher premium. A $400,000 rebuild costs more to insure than a $200,000 rebuild.
Construction type — Frame construction costs more to insure than masonry or brick because frame is more susceptible to fire and wind damage.
Age of property — Older properties have higher premiums because aging systems (electrical, plumbing, roof) are more likely to fail. Roofs over 20 years old can be especially expensive or difficult to insure.
Claims history — Previous claims on the property or by you as a policyholder raise premiums for 3-5 years.
Deductible — Higher deductible = lower premium. Common deductibles range from $1,000 to $5,000. Increasing from $1,000 to $2,500 typically saves 10-15% on premiums.
Coverage limits — More coverage costs more, obviously. But cutting coverage to save money is usually a bad trade.
Cost by State (Annual Average, DP-3, Single-Family)
| State | Average Annual Premium |
|---|---|
| Florida | $2,800–$4,500 |
| Louisiana | $2,500–$3,800 |
| Texas | $2,200–$3,500 |
| Oklahoma | $2,000–$3,200 |
| California | $1,500–$2,800 |
| New York | $1,400–$2,200 |
| Ohio | $1,000–$1,600 |
| Utah | $800–$1,300 |
| Oregon | $800–$1,400 |
How to Save on Landlord Insurance
- Bundle policies — Insure multiple properties with one carrier. Multi-policy discounts of 10-25% are common.
- Increase deductibles — Go to $2,500 or $5,000 if you can absorb small losses.
- Improve the property — New roof, updated electrical, modern plumbing all reduce premiums.
- Install protective devices — Alarm systems, smoke detectors, deadbolts, and sprinkler systems can earn 5-15% discounts.
- Shop annually — Insurance markets change. Get 3-5 quotes every renewal period.
- Maintain claims-free status — Avoid filing small claims (under $3,000). The premium increase over 3-5 years often exceeds the claim payout.
- Choose the right policy type — Don't overpay for DP-3 on a low-value property where DP-2 provides adequate coverage.
What Landlord Insurance Does NOT Cover
Even the best landlord insurance has exclusions. Know them:
- Tenant belongings — Tenants need renter's insurance
- Flood damage — Separate [flood insurance](/blog/hurricane-insurance-guide) required
- Earthquake damage — Separate [earthquake insurance](/blog/earthquake-insurance-guide) or endorsement required
- Normal wear and tear — Deterioration, maintenance issues, and aging aren't covered
- Pest damage — Termites, rodents, bed bugs are your problem
- Intentional damage by you — If you damage your own property on purpose, no coverage
- Mold (usually) — Most policies exclude mold unless it results directly from a covered peril
- Government actions — Condemnation, seizure, or destruction by government order
- Tenant-caused damage beyond the deposit — Standard policies don't cover tenant damage (some offer endorsements)
The tenant damage issue is a common frustration. If a tenant trashes the property, your landlord insurance typically won't pay for it. Some insurers offer "malicious damage by tenant" endorsements. Ask about this specifically when shopping for coverage.
Landlord Insurance for Different Property Types
Single-Family Rentals
Straightforward — one DP-3 policy per property. Most major insurers and specialty landlord insurance companies offer these.
Multi-Family (2-4 Units)
Can be covered under a single residential landlord policy. Coverage A should reflect the rebuild cost of the entire building. Liability limits should be higher — more units means more tenants and more liability exposure. Consider $1 million liability minimum.
Multi-Family (5+ Units)
Requires a commercial property insurance policy, not a residential landlord policy. Commercial policies offer higher limits, different coverage structures, and can be customized more extensively. You'll likely work with a commercial insurance broker.
Condos
You need an HO-6 (condo unit owner) policy modified for rental use, plus any coverage not provided by the HOA's master policy. The master policy typically covers the building structure. Your policy covers interior improvements, your personal property at the unit, liability, and loss of rents.
Short-Term Rentals (Airbnb, VRBO)
Standard landlord insurance typically excludes short-term rental activity. You need either:
- A short-term rental specific policy from companies like Proper, CBIZ, or Safely
- A commercial hospitality policy
- Host platform insurance (Airbnb's AirCover has significant gaps — don't rely on it alone)
Vacant Properties
Between tenants or during [renovation](/blog/bathroom-renovation-cost-guide), your property is vacant. Standard landlord policies limit coverage after 30-60 days of vacancy. Options:
- Vacancy endorsement on your existing policy
- Vacant property insurance — separate policy designed for unoccupied buildings
- Builder's risk insurance — if the property is under major renovation
Building a Complete Insurance Stack for Rental Properties
Here's the full insurance picture for a well-protected landlord:
| Policy | What It Covers | Priority |
|---|---|---|
| Landlord insurance (DP-3) | Building, liability, lost rents, your property | Essential |
| Umbrella insurance | Excess liability beyond landlord policy limits | Essential |
| Flood insurance | Flood damage | Essential if in flood zone; recommended for all |
| Earthquake insurance | Earthquake damage | Essential in seismic zones |
| Equipment breakdown | Mechanical/electrical system failure | Recommended |
| Water backup endorsement | Sewer/drain backup damage | Recommended |
| Ordinance or law endorsement | Building code upgrade costs | Recommended for older properties |
| Vacancy coverage | Coverage during vacant periods | As needed |
Frequently Asked Questions
Can I use homeowners insurance for a rental property?
No. Homeowners insurance is for owner-occupied properties. If you rent out your home and file a claim, the insurer can deny it because the property's use doesn't match the policy. Some insurers will cancel your policy if they discover you're renting the property without the appropriate coverage. If you're renting out a room in your primary residence, talk to your homeowners insurer about a rider or endorsement.
Do I need landlord insurance if I use a property manager?
Yes. A property manager manages operations — they don't insure your building. You need landlord insurance for the property itself. Your property manager should carry their own professional liability insurance (errors and omissions) and general liability insurance. Verify this annually and get certificates of insurance.
Should I require tenants to have renter's insurance?
Yes, and it's becoming standard practice. Renter's insurance costs tenants $15-$30 per month and covers their belongings, their personal liability, and additional living expenses. When tenants have renter's insurance, they're less likely to sue you for losses their own policy covers. Many landlords now make it a lease requirement.
What's the difference between replacement cost and actual cash value?
Replacement cost pays to rebuild or replace with new, equivalent materials. Actual cash value pays replacement cost minus depreciation. Example: a 10-year-old HVAC system costs $8,000 to replace. With a 15-year useful life, it's 67% depreciated. ACV pays $2,640 ($8,000 × 33%). Replacement cost pays $8,000. Over the life of a building, the difference adds up to tens of thousands of dollars.
How do I insure a property I'm renovating before renting?
During major renovation (gut rehab, structural work), you need builder's risk insurance. It covers the building and materials during construction. Once renovation is complete and you're ready for tenants, switch to a standard landlord policy. Some insurers offer policies that transition from builder's risk to landlord coverage.
Does landlord insurance cover bed bugs?
No. Pest infestations of any kind — bed bugs, termites, mice, cockroaches — are considered maintenance issues, not insurable events. Prevention and treatment are your responsibility as the landlord. Budget $500-$2,000 per bed bug treatment per unit.
The Bottom Line
Landlord insurance isn't something to cheap out on. A DP-3 policy with adequate limits, reasonable endorsements, and an umbrella policy on top creates a solid foundation of protection for your rental investment.
Get quotes from at least three insurers. Read the policy — especially the exclusions. Review your coverage annually as property values and rebuild costs change.
Your rental property is a business asset. Insure it like one.
Related Articles
- [[Rental [Property Depreciation](/blog/rental-property-tax-deductions)](/blog/depreciation-real-estate-guide) Guide: How to Maximize Your Tax Deductions in 2026](/blog/depreciation-rental-property-guide)
- [Best College Towns for [Rental Property Investment](/blog/best-states-for-rental-property-investment-2026)](/blog/best-college-towns-for-rental)
- How to Identify the Best Neighborhoods for Rental Property Investment (Data-Driven Approach)
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