Landlord Insurance Check: Why Standard Policies Don't Work

It is a common story: You move into a new house but decide to keep your old one and rent it out. You think, "Great, I already have insurance on it, so I'm all set."

Stop right there. If you rent out a home insured under a standard homeowner's policy (HO-3), you are almost certainly voiding your coverage. If the house burns down, the insurer will pay you $0.

Occupancy Matters

Insurance policies are strictly defined by "occupancy."

• Owner-Occupied: You live there. (Use HO-3 Policy)
• Tenant-Occupied: Someone else lives there. (Use DP-3 Policy)

When you signed your HO-3 application, you promised you lived there. Once you move out and sign a lease with a tenant, the "risk profile" changes completely. Tenants are statistically less careful than owners.

What Does Landlord Insurance Cover?

Landlord policies (often called "Dwelling Fire" policies) cover three main buckets:

1. The Dwelling (Property)

Like normal insurance, this covers damage to the house from fire, wind, hail, and vandalism.

2. Landlord Liability

This is crucial. If your tenant trips on a loose carpet or falls down poorly lit stairs, they can sue you for heavily. Landlord liability protects your assets from these lawsuits.

3. Loss of Rental Income

If a covered peril (like a fire) makes the home uninhabitable, your tenants stop paying rent. This coverage pays you the equivalent rent checks so you can keep paying the mortgage.

The "Personal Property" Gap

You should legally require your tenants to buy their own Renters Insurance policy. It costs them $15/month and protects their belongings—and also provides liability coverage if they accidentally start a fire that damages your house.

Types of Landlord Policies

Conclusion

Being a landlord is a business, and you need a business insurance policy. Call your agent the moment you decide to rent out your property. The switch is easy, but the cost of not switching is catastrophic.

Frequently Asked Questions