Is Landlord Insurance More Expensive?

Last updated: March 31, 2025

If you're renting out a property you might wonder if landlord insurance costs more than standard homeowners coverage. The short answer is yes—landlord insurance typically runs about 15-20% higher than homeowners insurance due to the increased risks of renting. On average landlords pay around $1,300 to $1,680 per year though rates vary widely based on location property value and tenant demographics.

Why the price difference? Rental properties face greater liability risks and often require extra protections like loss of rental income coverage if the home becomes uninhabitable. Policies also come in different tiers (DP1 DP2 DP3) offering varying levels of protection. While it’s pricier than homeowners insurance the right policy can save you from costly surprises down the road.

What is Landlord Insurance?

Landlord insurance protects rental property owners from financial risks tied to renting out homes or commercial spaces. Unlike homeowners insurance, it includes specialized coverage for property damage, liability, and lost rental income.

Property Damage

Landlord insurance covers physical damage to your rental property caused by fire, storms, vandalism, or burst pipes. It also includes landlord-owned items like appliances or flooring if specified in the policy. Standard policies exclude floods and earthquakes, but you can add them as endorsements.

Liability

This coverage pays for medical bills or legal fees if a tenant, guest, or contractor gets injured on your property and sues. For example, if a tenant slips on an icy walkway you failed to maintain, liability insurance helps cover the costs.

Loss of Income

If your property becomes uninhabitable due to a covered event (e.g., fire or storm damage), loss-of-rent coverage compensates for missed rental payments. Policies vary, but this ensures financial stability while repairs are completed.

Factors That Affect the Cost of Landlord Insurance

Property Location

Crime rates and environmental risks directly impact your landlord insurance premiums. Properties in high-crime areas or regions prone to natural disasters (e.g., hurricanes, wildfires, floods) cost 20-30% more to insure. Urban locations with frequent break-ins also increase rates.

Property Type and Condition

• Construction materials: Wood-framed buildings raise premiums due to fire and termite risks.
• Age: Older properties (over 30 years) often have higher costs because of structural wear.
• Amenities: Pools, spas, or trampolines add liability exposure, increasing premiums by 10-15%.

Tenant Profile

• Lease terms: Long-term tenants (year-long leases) may lower rates by signaling stability.
• Tenant type: Student rentals or short-term leases often cost more due to higher turnover risks.
• Pets: Aggressive breeds (e.g., pit bulls, Rottweilers) can raise premiums by 5-10%.

Coverage Limits and Deductibles

• Higher coverage limits (e.g., $500,000 liability vs. $300,000) increase annual premiums.
• Opting for a $2,500 deductible instead of $1,000 reduces costs by 15-20%.
• Actual Cash Value (ACV) policies cost less than Replacement Cost Value (RCV) but offer lower payouts.

Claims History

Frequent claims (e.g., 2+ in 3 years) lead to premium hikes of 25-50%. Insurers may even cancel policies for excessive claims.

Additional Factors

• Rental income coverage: Adds 5-10% to premiums but reimburses lost rent after covered events.
• Multi-unit buildings: Cost more to insure than single-family homes due to higher liability risks.

Why Landlord Insurance is Typically More Expensive

Landlord insurance costs 15-25% more than homeowners insurance, with average annual premiums ranging from $1,300 to $1,875. The higher price reflects increased risks tied to rental properties.

Higher Risk Exposure

Tenant-occupied properties experience more frequent and costly claims than owner-occupied homes. Landlords face risks like:

• Property damage from tenant neglect or accidents (e.g., broken appliances, water leaks).
• Vandalism or unauthorized alterations to the property.
• Higher likelihood of fire incidents due to tenant behavior.

Tenant-Related Claims

Tenants file claims 30-40% more often than homeowners, driving up premiums. Common issues include:

• Liability claims for injuries sustained on the property (e.g., slips, falls).
• Disputes over security deposits or lease violations requiring legal coverage.
• Pet-related damages or bites, which increase liability exposure.

Property Vacancies

Vacant rental units pose additional risks, such as:

• Squatters or break-ins due to lack of occupancy.
• Undetected maintenance issues (e.g., mold, pipe bursts) worsening over time.
• Lost rental income coverage, which insurers factor into premiums.

Liability Issues

Landlord policies include broader liability protection, covering:

• Legal fees if a tenant sues for unsafe living conditions.
• Medical expenses for tenant or guest injuries on the property.
• Property damage caused by tenants to neighboring units.

Location and External Factors

Properties in high-risk areas (e.g., flood zones, earthquake-prone regions) see premiums 20-30% higher. Insurers also consider:

• Local crime rates impacting vandalism or theft risks.
• Building materials (e.g., wood-frame structures cost more to insure).
• Proximity to fire stations or hydrants affecting response times.

Coverage Add-Ons

• Loss of rental income during repairs after covered disasters.
• Landlord-specific items (e.g., lawnmowers, maintenance equipment).
• Optional endorsements for natural disasters or equipment breakdowns.

Coverage Options in Landlord Insurance

Property Damage Coverage

Property damage coverage protects the physical structure of your rental property (e.g., roof, walls, foundation) from perils like fire, storms, vandalism, or burst pipes. It may also include landlord-owned furnishings (e.g., appliances, flooring) if specified in the policy. Replacement cost coverage is preferable to actual cash value, especially for older fixtures.

Liability Protection

Liability coverage pays for medical bills or legal fees if a tenant, guest, or contractor is injured on your property and sues you. For example, if a tenant slips on an icy walkway you failed to maintain, this coverage applies. Many landlords opt for at least $1,000,000 in liability protection to match their financial risk.

Loss of Rental Income

Loss-of-rent coverage compensates you for missed rental payments if the property becomes uninhabitable due to a covered event (e.g., fire, mold, structural damage). Some policies also include rental default insurance, which covers nonpayment by tenants under specific conditions.

Additional Coverages

Standard landlord policies often exclude certain risks, but you can add endorsements for:

• Flood/earthquake insurance – Essential in high-risk areas.
• Vandalism/burglary coverage – Reimburses damages or stolen property.
• Building code upgrades – Covers costs to meet updated regulations during repairs.
• Equipment breakdown – Protects against failures in HVAC or appliances.

Policy Tiers (DP1, DP2, DP3)

• DP1 – Basic coverage for fire, vandalism, wind, and hail.
• DP2 – More comprehensive, covering named hazards.
• DP3 – Broadest protection, including replacement costs for most perils unless excluded.

Choosing the right coverage depends on your property’s location, tenant profile, and financial risk tolerance.

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Ways to Lower Landlord Insurance Costs

Increase Deductibles

Raising your deductible reduces premiums. Choose an amount you can afford if a claim occurs.

Install Safety Features

Adding alarms, smoke detectors, or fire sprinklers lowers risk and may qualify you for discounts. Hardwired security systems and child-safe windows further enhance safety.

Bundle Insurance Policies

Combine landlord insurance with other policies (e.g., auto or homeowners) from the same provider to save 10-20%.

Maintain the Property

Regular upkeep of plumbing, electrical systems, and roofing minimizes damage risks. Upgrading these systems improves insurance terms at renewal.

Avoid Small Claims

Frequent claims increase premiums. Pay for minor repairs out-of-pocket to maintain a claims-free record.

Compare Quotes Annually

Review policies and shop around for better rates. Insurers adjust pricing, so switching may yield savings.

Improve Credit Score

A higher credit score often leads to lower premiums. Pay bills on time and reduce debt to maintain good credit.

Pay Premiums Annually

Opting for yearly payments instead of monthly installments may reduce overall costs.

Comply with Safety Regulations

Adhering to local safety codes prevents violations that could raise premiums. Install required detectors and locks.

Update Property Valuation

Regularly reassess your property’s value, including safety upgrades, to ensure accurate coverage and avoid overpaying.

Consider Liability Coverage

Adding a protective liability policy reduces financial risks from tenant injuries or lawsuits.

Common Mistakes Landlords Make When Choosing Insurance

Underestimating Rebuilding Costs

Many landlords base coverage limits on the property's market value rather than its actual rebuilding cost. Construction expenses, labor fees, and material prices often exceed initial estimates, leaving landlords underinsured by 20-30% in disaster scenarios.

Ignoring Liability Coverage

Standard policies may include liability limits as low as $100,000, but lawsuits from tenant injuries or property damage can quickly exceed this amount. Experts recommend at least $1,000,000 in coverage for adequate protection.

Overlooking Tenant-Related Risks

Failing to screen tenants properly increases risks like vandalism or unpaid rent. Properties with high tenant turnover or short-term leases experience 25% more claims, yet many landlords skip loss-of-rent or vandalism endorsements.

Assuming Uniform Policy Coverage

Landlord insurance policies vary significantly. Some exclude water damage from aging pipes, while others omit theft by tenants. Always verify inclusions like:

• Burglary coverage (for stolen appliances)
• Building code upgrades (for compliance costs)
• Flood insurance (separate from standard policies)

Neglecting Regular Policy Reviews

Premiums and risks change annually. Landlords who don’t compare quotes or adjust coverage after property upgrades miss potential savings of 10-15%.

Skipping Optional Protections

Common exclusions like dog bite liability or equipment breakdowns require add-ons. Without them, landlords pay out-of-pocket for 40% of tenant-related incidents.

Relying on Tenant Renters Insurance

Tenants’ policies cover their belongings, not the property structure. Landlords who assume otherwise risk uncovered damages from leaks, fires, or negligence.

Landlord Insurance vs. Homeowners Insurance

Landlord insurance and homeowners insurance serve different purposes, with key differences in coverage, cost, and risk protection.

Can I use my homeowners insurance instead of buying landlord insurance?

No, homeowners insurance doesn’t cover rental properties if you don’t live there. Insurers require landlord insurance for tenant-occupied dwellings because:

• Risk exposure increases – Tenants file 30-40% more claims than owner-occupants.
• Liability coverage differs – Landlord policies include broader protection for tenant injuries or disputes.
• Lost rent protection – Homeowners insurance excludes reimbursement for rental income interruptions.

Switching to landlord insurance is mandatory once you rent out your property, as standard policies void coverage for non-owner-occupied homes.

State-by-State Comparison of Landlord Insurance Costs

Landlord insurance costs vary significantly across states due to factors like property values, local regulations, and climate risks. The national average is approximately $1,478 annually, but premiums range from $595 to $2,419 depending on location.

Highest-Cost States for Landlord Insurance

• Rhode Island: $2,419
• Delaware: $2,419
• North Dakota: $2,173
• Florida: $1,721
• Louisiana: $1,722

These states often face higher premiums due to natural disaster risks (e.g., hurricanes in Florida) or elevated property values.

Lowest-Cost States for Landlord Insurance

• Oklahoma: $595
• Nevada: $739
• Arizona: $846
• Iowa: ~$1,101
• Vermont: ~$990

Lower-risk regions with stable climates and affordable property markets typically have the most competitive rates.

Mid-Range States

• California: $903
• Texas: $1,065
• New York: $1,396
• Colorado: $1,608
• Pennsylvania: $993

Premiums reflect localized risks, such as earthquakes in California or tornadoes in Oklahoma. Always compare quotes to account for property-specific variables like age, occupancy, and coverage limits.

What Specific Coverages Should Every Landlord Policy Include?

Property Damage Coverage

Property damage coverage protects the physical structure (e.g., roof, walls, foundation) from perils like fire, storms, vandalism, or burst pipes. It may also include landlord-owned furnishings (e.g., appliances, flooring) if specified in the policy. Opt for replacement-cost coverage instead of actual cash value, especially for older fixtures or furnishings.

Liability Protection

Liability coverage pays for medical bills or legal fees if a tenant, guest, or contractor is injured on the property due to maintenance issues (e.g., icy walkways, structural collapse). Many landlords choose at least $1,000,000 in liability coverage to reflect their financial risk tolerance.

Loss of Rental Income

This coverage compensates you for lost rent if the property becomes uninhabitable due to a covered event (e.g., fire, severe mold, or natural disasters). It ensures financial stability during repairs or tenant displacement.

Additional Recommended Coverages

• Flood/Earthquake Insurance: Often excluded from standard policies but crucial in high-risk areas.
• Vandalism/Burglary Coverage: Reimburses damages or stolen property caused by tenants or intruders.
• Building Code Upgrades: Covers costs to meet updated building codes during repairs or rebuilds.
• Tenant Default Protection: Safeguards against nonpayment of rent due to tenant financial issues.

Policy Tiers (DP1, DP2, DP3)

• DP1: Basic coverage for fire, vandalism, wind, and hail.
• DP2: Adds named perils (e.g., falling objects, electrical surges).
• DP3: Most comprehensive, covering all perils unless explicitly excluded.

Select coverage based on property location, tenant profile, and financial risk tolerance.

Tax Benefits of Landlord Insurance

Landlord insurance premiums qualify as tax-deductible rental expenses under IRS guidelines. You report these costs under the Insurance section of Schedule E (Form 1040 or 1040SR), reducing taxable rental income.

How Deductions Offset Costs

• Lower taxable income: Deducting premiums decreases your reported rental income, potentially placing you in a lower tax bracket.
• Average savings: With landlord insurance averaging $1,478 annually, the deduction mitigates the higher cost compared to homeowners insurance.
• Recordkeeping: Maintain proof of payments (e.g., policy documents, bank statements) to validate deductions during audits.

Key IRS Guidelines

• Eligible expenses: Premiums for property damage, liability, and loss-of-rent coverage are deductible.
• Exclusions: Deductions apply only to active rental properties, not personal residences.
• Professional advice: Consult a tax professional to navigate state-specific rules or complex scenarios (e.g., mixed-use properties).

Additional Cost-Reduction Strategies

• Bundling policies: Combining landlord insurance with auto or homeowners policies may yield discounts, further lowering net expenses.
• Safety upgrades: Installing alarms or fire sprinklers can reduce premiums while qualifying for deductions as property improvements.

Note: The IRS requires expenses to be "ordinary and necessary" for rental operations. Always verify current tax laws, as regulations may change.

Rent Guarantee and Legal Expense Insurance

Rent guarantee insurance covers lost rental income if tenants default on payments. Policies typically reimburse up to 12 months of unpaid rent, with claim limits ranging from $10,000 to $50,000 annually. Coverage activates after a waiting period (often 30-60 days) and requires proof of tenant non-payment.

Legal expense insurance protects landlords from costs tied to tenant disputes. It covers:

• Eviction proceedings (court fees, attorney costs)
• Lease violations (breach of contract claims)
• Property damage disputes (security deposit conflicts)

Premiums for these add-ons increase landlord insurance costs by 10-20%, depending on:

• Tenant screening standards (higher-risk tenants raise rates)
• Local eviction laws (lengthier processes increase premiums)
• Coverage limits (higher payouts require higher premiums)

Combined, these protections mitigate financial risks from non-paying tenants or legal battles, but they’re optional. Compare policy terms to balance cost and coverage needs.

Importance of Accurate Property Valuation

Accurate property valuation directly impacts landlord insurance costs, ensuring you neither overpay for coverage nor risk being underinsured. Insurance premiums are calculated based on the property’s replacement cost, not its market value, making precise valuation critical.

Key Reasons for Proper Valuation

• Avoids underinsurance: Underestimating rebuilding costs leaves you responsible for out-of-pocket expenses if a total loss occurs.
• Prevents overpayment: Overvaluing your property leads to unnecessarily high premiums without added benefits.
• Complies with policy terms: Insurers may deny claims if valuations significantly deviate from actual rebuilding costs.

Factors Influencing Replacement Cost

• Construction materials: High-quality materials (e.g., brick, steel) increase rebuilding expenses compared to standard wood framing.
• Local labor rates: Areas with higher construction costs raise replacement estimates.
• Property features: Custom upgrades (e.g., granite countertops, smart systems) add to valuation.

How to Ensure Accuracy

1. Hire a professional appraiser for a detailed rebuilding cost assessment.
2. Use insurer-approved tools like Marshall & Swift calculators for standardized estimates.
3. Review valuations annually to account for inflation, material shortages, or regional cost changes.

Incorrect valuations can result in claim disputes or financial losses, making regular updates essential for optimal coverage.

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Why Landlord Insurance is Essential for DSCR Loans?

Landlord insurance isn't just a smart choice—it's often a requirement for DSCR loans. Lenders want assurance that your rental property is protected against risks that could impact your ability to repay the loan.

With coverage for property damage, liability claims, and lost rental income, landlord insurance safeguards your investment and keeps your cash flow stable. This stability is key for meeting DSCR loan requirements.

By securing the right policy, you're not only protecting your property but also strengthening your financial position as a landlord. It's a crucial step in managing risks and ensuring long-term success with rental properties.

Lender Guidelines: Landlord Insurance

Landlord Insurance is a bundle the following coverages:

• Dwelling
• Liability
• Loss of Rent

Working within lender guidelines and personal risk tolerances, landlord insurance policies are highly customizable to help balance coverage limits and associated policy premium.

Dwelling Coverage

Commonly referred to as "Property Insurance":

General Liability Coverage

Loss of Rent Coverage

Commonly referred to as "Business Interruption Insurance":

Cost Factors for DSCR Loan Insurance

Premiums depend on:

• Property location (high-risk zones increase costs).
• Coverage limits (higher limits raise premiums).
• Deductible choices (lower deductibles lead to higher annual payments).

Lender-Specific Conditions

Some lenders impose stricter requirements, such as:

• Flood insurance mandates for properties in SFHAs (Special Flood Hazard Areas).
• Higher liability limits (i.e. $1,000,000 per occurrence instead of $500,000).

Optimizing Insurance for DSCR Loans

• Compare quotes from at least 3 insurers to balance cost and coverage.
• Bundle landlord and flood insurance for discounts.
• Increase deductibles to lower premiums if cash reserves allow.

Frequently Asked Questions

What is landlord insurance?

Landlord insurance is specialized coverage for rental property owners, protecting against financial risks like property damage, liability claims, and loss of rental income. It covers events such as fires, storms, vandalism, and tenant injuries.

How much does landlord insurance cost?

On average, landlord insurance costs between $1,300 and $1,875 annually, which is 15-25% more than standard homeowners insurance due to higher risks. Premiums vary based on location, property value, and coverage limits.

What does landlord insurance cover?

It includes property damage (fire, storms, vandalism), liability protection (medical/legal costs for injuries), and loss-of-rent coverage (compensation if the property is uninhabitable). Optional add-ons include flood or vandalism coverage.

Why is landlord insurance more expensive than homeowners insurance?

Landlord insurance costs more because rental properties face higher risks, such as tenant-related damages, frequent liability claims, and the need for rental income protection.

What factors affect landlord insurance rates?

Key factors include property location (high-crime/disaster-prone areas), tenant profile (pets, lease terms), coverage limits, deductibles, claims history, and property age/condition.

Can I use homeowners insurance for a rental property?

No. Homeowners insurance voids coverage once a property is rented out. Landlord insurance is required for non-owner-occupied homes to address rental-specific risks.

How can I lower my landlord insurance costs?

Increase deductibles, install safety features (alarms, smoke detectors), bundle policies, maintain the property, avoid small claims, and compare quotes annually.

What is loss-of-rent coverage?

It reimburses landlords for missed rental payments if the property becomes uninhabitable due to a covered event (e.g., fire or storm damage), ensuring financial stability during repairs.

Are landlord insurance premiums tax-deductible?

Yes, under IRS guidelines, landlord insurance premiums qualify as tax-deductible rental expenses, reducing taxable income. Consult a tax professional for state-specific rules.

What’s the difference between DP1, DP2, and DP3 policies?

These are policy tiers offering varying coverage levels:

• DP1: Basic, actual cash value coverage.
• DP2: Mid-tier, broader perils.
• DP3: Comprehensive, replacement cost coverage.

Do tenants need renters insurance?

Yes, tenants should have renters insurance to cover their personal belongings and liability. Landlord insurance only protects the property owner’s assets.

What is rent guarantee insurance?

An add-on that covers lost rental income if a tenant defaults on payments, typically reimbursing up to 12 months of unpaid rent after a waiting period.

How often should I review my landlord insurance policy?

Annually, or when major changes occur (e.g., property upgrades, new tenants, or local regulation updates) to ensure adequate coverage and competitive rates.

What are common landlord insurance mistakes?

Underestimating rebuilding costs, skipping liability coverage, ignoring tenant risks, not comparing policies, and assuming renters insurance covers landlord liabilities.

Which states have the highest landlord insurance costs?

Rhode Island and Delaware average $2,419 annually—the highest in the U.S. due to property values and climate risks. Oklahoma is the cheapest at $595/year.

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