Difference Between Homeowners And Landlord Insurance

A homeowners policy and a landlord policy answer different questions, and the difference is not cosmetic. One is written around a property you live in; the other around a property that produces income and houses somebody else. Which one you hold should follow how the property is actually used.

Occupancy also brings a duty a homeowners policy never had to consider. Once a property is rented, California implies a warranty of habitability into the lease. What the habitability duty means for coverage is a question owners rarely ask until something goes wrong.

What is homeowners insurance built for?

Homeowners’ insurance is written around an owner-occupied residence. It responds to damage to the structure and the owner’s belongings from causes the form covers, such as: 

• Weather
• Fire
• Vandalism

What is landlord insurance built for?

For rental units, landlord insurance is comparable to homeowners insurance, but there are a few key distinctions. These policies provide structural coverage for any related outbuildings and loss of rent insurance if a covered peril renders the property unsuitable. 

It also carries liability coverage, which responds where someone is injured at the property and the owner is alleged to be responsible.

Where do the two overlap?

A lender will require property insurance either way, and will require the form that matches the occupancy. On a rental that means a landlord policy rather than a homeowners policy. 

Here are some of the similarities of the insurances:

• Both are written to fund repair or rebuilding of the structure after a covered cause of loss, up to the limit on the declarations page.
• Both carry liability for injuries arising from the property, though the exposure differs once someone else lives there.
• Both exclude earthquake and flood, which have to be arranged separately either way.

What changes the moment you rent it out?

The switch is not only about which policy you hold. Renting changes the description the policy was issued on, and a homeowners form issued for owner occupancy is answering that description.

Two California points follow. The warranty of habitability applies to every residential rental here and cannot be waived, so a duty attaches that never existed while you lived there. And earthquake and flood sit outside both forms, which does not change because a tenant moved in.

Telling the carrier before the tenancy starts is the practical step. A change in occupancy is an underwriting fact, not an administrative one.

How do the two differ?

Three differences do most of the work:

• Personal property. A homeowners policy covers the owner’s belongings. A landlord policy covers only what the owner supplies and leaves at the property, such as appliances, not the tenant’s possessions.
• Loss of rents, sometimes called fair rental value, sits on the landlord policy rather than the homeowners policy. It replaces rental income while the property is repaired after a covered physical loss, so a tenant who simply stops paying is a collection matter rather than a claim.
• Landlord insurance does not cover a tenant’s belongings. The policy written for those is renters insurance, taken out by the tenant, which is why many landlords require proof of it in the lease.

Which one applies to you?

The question is not which policy is better. It is which one describes your property as it is being used today, because that description is what the policy answers to. 

At Schneiderman Insurance Agency we go through what each form reaches and where it stops, so the decision about what to carry stays yours. You can get more information about our products and services by calling our agency at (818) 322-4744. Request a landlord insurance quote online.

Disclaimer

This article is provided by Schneiderman Insurance Agency for general informational purposes only. It is not legal, tax, financial, claims, or coverage advice. We are licensed insurance professionals, not attorneys, accountants, or financial advisors, and nothing here should be relied on as a substitute for advice from a qualified professional in those fields. This content is general in nature and is not a review of, or a recommendation for, any individual reader’s specific insurance needs, policies, or circumstances. Insurance coverage depends entirely on the specific terms, conditions, endorsements, exclusions, limits, underwriting eligibility, carrier, and facts of each situation, and the actual policy language always controls. We do not guarantee any coverage, pricing, eligibility, underwriting approval, or claim outcome. Reading this article does not create an agent-client relationship. To understand how these issues apply to your situation, please review your own policy and speak with a licensed insurance professional, and consult legal, tax, or financial advisors where appropriate.