What Type of Insurance Should I Get For My Rental Property?

If you have homeowners insurance on a rental home, we’ve got some bad news. Your money is going to waste.  

That’s because the moment you list a home on the rental market or start using it as a vacation rental, you’re no longer covered. 

Homeowners insurance policies only offer protection for owner-occupied properties. 

When you own a rental, be that long-term rental or a short-term vacation rental — you need the right insurance policy to protect your asset. If you don't, you could have a claim denied and be liable for expensive repairs and legal fees. Oof. 

Now insurance isn’t exactly known for its simplicity and transparency. There’s a lot to decipher between homeowners insurance vs. landlord insurance vs. short-term rental insurance. But this article will give you a quick guide into the coverage homeowners need for the use of their home as a rental.

What type of insurance do homeowners need for a rental property?

Let’s start with homeowners who rent out their home long-term. This means you have tenants in the home full-time and the occasional vacancy where the home is empty.

You’ll need a policy called Landlord Insurance or Rental Property Insurance. Depending on the type of coverage you choose, this can protect you and your rental home against:

• Structural damage of the home itself in instances of vandalism, theft, fire, or storms
• Liability from injuries that happen on your property or damage caused by your residents and/or their guests
• Loss of rental income when the property is uninhabitable during repairs and restoration

When you’re shopping for rental home policies, you may come across the term ‘Dwelling Policy’ or ‘DP1, DP2, and DP3’. In a nutshell, this is a tiered system that defines the level of coverage. DP1 being a budget policy, DP3 being the most expensive with the most inclusions and DP2 falling mid-range in between. 

Most DP2 and DP3 policies will have the option to include loss of use. This is especially helpful for those who rely on rental income as it will cover a shortfall in rent. 

Regardless of tier, most policies exclude cover for flood and earthquake damage, which is an added extra. What you choose should depend on your budget, risk, and circumstances. There are also options to include coverage from FEMA’s National Flood Insurance Program. 

So what about if you have a short-term vacation rental? Landlord and Rental Property policies aren’t suitable for these, which we will cover next.

How much does landlord’s insurance cost in 2024?

In 2024, expect to pay an average of 15-20% more for a landlord insurance policy than you would for standard homeowners insurance. 

For example, if you took out a policy for a rental home in Sacramento, postcode 95814. According to this insurance.com calculator, if the dwelling was covered for $400,000 in rebuild costs with a $1,000 deductible and $100,000 of liability insurance, you would expect to pay between $962 - $2,921 per year for a homeowner policy in 2024. A landlord’s policy would be 15-20% higher, so expect a range of $1,106 - $3,505 per year for the same property, depending on how much coverage you opt for. 

Like all insurance, the cost of a premium will vary depending on:

• Location of the home
• Age, construction, and condition of the home
• How it’s used
• The cost of your deductible
• Whether you choose to pay upfront or monthly
• How much coverage you need
• Any optional extras included such as water damage and vandalism 

Will home insurance cover an Airbnb or short-term rental?

You guessed it: homeowners insurance won’t cover your home if it’s used as a short-term or vacation rental. And neither with a landlord policy. In this case you’ll need specified short-term rental insurance. This is because short-term rentals are higher risk than long-term rentals. 

Now it’s true that most vacation rental platforms include protection against guest behavior. But it’s important to remember that these are not sufficient insurance policies. Some platforms will offer host liability insurance, but this will do nothing to protect the home itself. 

If your property is hit by structural damage from a fire or storm, a platform like Airbnb or VRBO is not going to foot the bill. If it’s impacted by vandalism or theft that didn’t occur from a guest, you won’t be covered. This leaves you exposed to a lot of risk. 

How much does short-term rental insurance cost?

Expect to pay anywhere from 10-70% more for short-term rental insurance than you would for a homeowner policy. The actual cost of vacation rental insurance will vary depending on your home and its usage, however costs average $1,500 - $3,000 per year in 2024. 

Despite being banned on most platforms, vacation rentals are still notorious for wild parties and can leave property owners with massive cleanup bills. Making claims against guests for extra cleaning charges or damage can be a tough process and hard to prove. 

It’s worth keeping these additional costs in mind when comparing whether short-term or long-term rental is the best financial option for your home. 

Make insurance one less decision to worry about

With the option to build in the right Rental Home Insurance coverage for what you need, Belong will have your long-term rental home protected in minutes. It’s one of the many ways Belong is making it easier than ever for individuals to achieve financial freedom with a rental home.

To see how Belong is simplifying the rental experience (and making it easier to choose long-term renting for your home), visit our homeowner's page and learn about services in places like Austin, Charlotte, Los Angeles, Miami, San Francisco Bay Area, Seattle, and many more. 

Disclaimer: Belong thinks the word landlord is outdated and prefers ‘homeowners’. But in this article we need to make an important distinction between owner-occupied homes and landlords with tenant-occupied homes or vacation rentals, so we have to use the words landlord and tenant a little more than we’d like. This article provides a guide on the types of insurance available and approximate costs but should not be considered financial advice. Please read all insurance policy guides to ensure you have something that suits your personal home and situation.