Probably the most significant difference between rental property insurance, also known as dwelling fire insurance, and homeowners insurance is the insured’s status. As you can tell, homeowners insurance is meant for people who own their home and live in it. On the other hand, rental property insurance is meant for people who own property and rent it out to tenants. While the coverage between the 2 is quite similar, there are a few differences between them.
Differences in Coverage
A standard homeowners policy is in most cases necessary to get a mortgage and the policy is also sufficient (when it comes to coverage) for a single family household. For rental properties, landlords are free to get a homeowners policy, but by doing so they’re actually going to miss out on the perks of rental property insurance. For instance, a standard homeowner’s insurance policy won’t cover the landlord in the event of a loss of income after his property gets damaged. While initially landlords can save a bit of money by getting a homeowners insurance policy, they leave themselves open to massive losses if their property is damaged.
Loss of Rental Income
Homeowners’ policies do not offer coverage for loss of rental income and that’s why it’s important to get a rental property insurance policy. This means that when a tenant is forced out because of a covered loss (like a fire) the landlord loses money from rent they could have collected while the space is repaired. In this case, considering the landlord is properly insured, he’s going to be covered by the insurance company. When the landlord has a rental insurance policy though, the insurance company is going to provide him a fair rental income until his property becomes habitable again.
Both types of polices are going to cover damages caused by vandalism, theft, hail, wind and fire to any of the property’s permanent structures. If you get rental property insurance, then this is also going to cover items used in connection with the rental property, including laundry facility furnishings.
On the other hand, the standard homeowners insurance only covers personal belongings from inside the property. Therefore, if the property that is covered by the homeowners insurance becomes uninhabitable because of a peril included in the policy, the costs of living elsewhere is going to be covered by the insurance company until the necessary repairs and/or renovations are made.
On top of that, it’s important to mention that both policies offer liability insurance in case a guest is involved in an accident on the property or injures himself. This protects the landlord or the homeowner by covering reasonable medical expenses for the injured individual and by offering legal defenses if required.
Both homeowners and rental insurance policies have limitations. For instance, neither of them covers mechanical breakdown, earthquake or flood insurance. This means that if a sewer backup occurs, you are not covered unless you add a specific endorsement for that coverage. There are also limitations on coverage amounts. For stolen jewelry, the coverage amount is about two thousand dollars. However, for a rental property insurance policy, there’s no coverage for basic repairs and maintenance or the tenant’s personal property.
Keep in mind that every policy is different and this is a broad overview. Make sure you speak with your independent insurance agent to review your current coverage’s and the coverage options that are best for your situation.