Long-term rental insurance basics

Long-term rental insurance, usually called a landlord policy, covers a home you rent to tenants on a lease: the building, the things you leave in it, your liability as the owner, and the rent you lose if a covered loss makes the home unlivable. It’s written for 1 to 4 unit homes, townhouses, and condos rented on an annual basis.

The one thing it doesn’t cover is your tenant. Their furniture, their clothes, their liability for the kitchen fire they started are theirs to insure. More on that below.

Long-term rental insurance coverage options

• Dwelling (Coverage A): the structure itself: slab, walls, roof, built-in systems.
• Other structures (Coverage B): detached garages, fences, sheds.
• Personal property (Coverage C): only what you own and leave for the tenant’s use, like appliances, window treatments, or a lawnmower.
• Fair rental value (Coverage D): the rent you lose while a covered loss is being repaired.
• Liability: defense costs and settlements if someone is hurt and the claim is your fault as the owner.
• Flood and wind: flood is excluded from standard landlord policies and bought separately. In much of Florida, wind has its own deductible and sometimes its own policy.

Why doesn’t my homeowners policy cover a rental?

A homeowners policy is written for a home you live in. Once you move out and a tenant moves in, the risk is different: someone else controls the home day to day, and you’re earning income from it. Most homeowners policies either exclude that use or were never priced for it. If you’re converting your own home into a rental, call your agent before the lease is signed, not after the first claim.

What’s the difference between a DP-1 and a DP-3 landlord policy?

Landlord policies are commonly written on dwelling property forms, and the two you’ll hear about most are the DP-1 and the DP-3.

A DP-1 is basic. It covers a short list of named perils, and it often pays actual cash value, meaning replacement cost minus depreciation. It is cheaper, and a claim on a 15-year-old roof shows you why.

A DP-3 is broader. It covers the building against any cause of loss that isn’t specifically excluded, and it usually pays replacement cost on the structure.

For most rentals with a mortgage or real value in the building, the DP-3 is the form to start with. Carriers vary on what they’ll offer for older homes.

Does landlord insurance cover lost rent?

Many landlord policies include fair rental value coverage. If a covered loss, say a fire or a hurricane, makes the home unlivable, the policy can pay the rent you would have collected while it’s repaired, up to the limit. It doesn’t pay when a tenant stops paying. That’s a lease and collections problem, not a property loss.

Should I require my tenants to carry renters insurance?

Many landlords do, and it protects you more than it looks. Your policy covers your building and your liability. It doesn’t cover the tenant’s belongings, and it doesn’t cover the tenant’s own liability. When a tenant’s candle burns a unit, their renters policy can be the one that responds for their stuff and for the damage they caused, instead of everything landing on your policy and your loss history. Put the requirement in the lease and ask for proof at move-in. See our renters insurance guide for what your tenants would be buying.

What happens if my rental sits vacant?

Pay attention between tenants. Many landlord policies limit coverage once a home has been vacant for a set period, commonly 60 consecutive days. Vandalism and some water losses are the usual casualties. If you expect a long gap, for a renovation or a slow market, tell your agent before the clock runs out.

Can I insure a rental owned by an LLC?

Yes. Many investors hold rentals in an LLC, and carriers write them. Make sure the LLC is the named insured, since the policy should match whoever owns the property on the deed, and that any individual owners who also need protection are listed. If you own several homes, portfolio structure affects both cost and liability; our short-term rental insurance page covers the portfolio questions in more detail.

Renting a room, a lodger, or a spare unit

Renting out a room in the home you live in sits between a homeowners policy and a landlord policy. Some homeowners policies allow a roomer or boarder with limits. Others restrict it. Ask your agent before you take in a lodger.

Long-term, mid-term, or short-term?

Leases of six months or more are long-term rentals. Weekly or nightly stays are short-term rentals and need a short-term rental policy, which is built for guest turnover and booking income. Mid-term stays, like the 30-to-90-day furnished rentals popular with traveling nurses, sit in between, and carriers draw that line differently. Tell your agent how you rent the home, in practice.

The same goes for rental arbitrage, where you lease a home and sublet it as a short-term rental. The owner’s landlord policy almost certainly wasn’t written for that use, and you, as the operator, need your own coverage for it. Get the owner’s permission in writing and the insurance sorted before the first booking.

Long-term rental insurance FAQ

How much does landlord insurance cost compared with homeowners insurance?

A landlord policy often costs more than a homeowners policy on the same house, because a rented home carries different risk. The actual number depends on the home’s age, roof, location, wind exposure, and the coverage form.

Does landlord insurance cover tenant damage?

It depends on the cause and the policy. Sudden accidental damage, like a fire, is generally treated differently from wear and tear or intentional damage. Read the exclusions, and keep a security deposit and move-in photos.

Do I need flood insurance on a rental?

If your lender requires it, yes. If not, look at the flood zone and the building before you decide. Standard landlord policies exclude flood.

Why use Fudge for long-term rental insurance?

Fudge Insurance is an independent agency. We’ve been in business since 2006, and we write rental homes from small condos to large single-family houses.

• Experience writing rental properties owned by LLCs
• Access to a wide range of carriers, which matters in the Florida market
• One agency for your long-term rentals, your short-term rentals, and your umbrella

Thinking about renting out a home, or already renting one on a homeowners policy? Ask us to look over your coverage.

Request a quote today!

We would be happy to quote your long-term rental insurance needs.