Landlord policy

A landlord policy insures a property that is rented out rather than lived in by its owner. It is usually written as a dwelling fire policy, and it differs from homeowners coverage in ways that matter.

What it covers#

The structure, on the same basis principles as any property policy — replacement cost or actual cash value, with the distinction mattering as much here as anywhere.

Liability, for injuries occurring on the property. For a landlord this is the coverage most likely to face a claim exceeding the building's value.

Loss of rental income, where a covered loss makes the property uninhabitable. Time-limited, and tied to an insured peril — it does not cover a tenant who simply stops paying.

Owner-held contents, meaning appliances and any furnishings the landlord provides, not the tenant's possessions.

The mistake that voids coverage#

Keeping a homeowners policy on a property that has been rented out.

A homeowners policy is written on the basis of owner-occupancy. Renting the property breaches that basis, and the consequence surfaces at a claim, when the insurer examines the circumstances and discovers the property has been tenanted for two years.

This happens constantly with accidental landlords — someone who moved, could not sell, and rented the house out without telling the insurer. The policy keeps renewing and keeps collecting premiums, and covers nothing.

Converting is straightforward and usually not expensive. Not converting can mean a total loss with no recovery.

Requiring renters insurance#

A lease requirement that tenants carry renters insurance does two useful things.

It covers the tenant's belongings, which the landlord policy does not — avoiding the argument after a fire about who pays for the tenant's furniture.

And it gives the tenant liability coverage, which matters when a tenant causes damage. Without it, the landlord's insurer pays and then attempts to recover from a tenant who has nothing.

Vacancy, again#

A landlord policy carries the same vacancy restrictions as any other property policy. Between tenants beyond the stated period — commonly thirty or sixty days — coverage for vandalism, glass and water damage is restricted or excluded.

For a landlord doing a substantial turnover between tenancies, that window closes faster than the work takes. A vacancy endorsement or a separate vacant property policy covers the gap, and it is far cheaper than the loss it prevents.

Where it connects to distress#

An uninsured or wrongly insured rental that suffers a significant loss is frequently not repaired, because there is no money to repair it with.

The property goes vacant, the vacancy triggers registration obligations in cities that have them, the fees become special assessments on the tax bill, and the tax bill goes delinquent. The insurance decision made years earlier is the first link in that chain.