Do I need to change my homeowners insurance if I rent out my house?

Renting out your home typically means you must change your homeowners insurance policy to a landlord insurance policy, but there are exceptions. It depends on which insurance company you choose and how you rent your home.

Homeowners insurance is designed for owner-occupants; that is, the person who owns the home lives in the home. Renting your home to someone else leads to new risks, including a higher risk of lawsuits, property damage that may go undetected, and maintenance problems that can quietly worsen over time.

Standard home insurance policies aren’t priced to reflect those risks. In fact, if you try to file a claim using your standard homeowners insurance policy for a rental property, you risk having your claim denied — and the insurer could even cancel your coverage.

Landlord insurance vs. homeowners insurance: What are the key differences?

Standard landlord insurance (DP3) and homeowners insurance (HO-3) both provide coverage for your dwelling and other structures on your property in the event that they’re damaged by a covered hazard (called a peril in the insurance world). However, the two policies treat liability coverage, personal property coverage, and loss of use (called fair rental value for landlords) a little differently.

Here’s a closer look at those key differences.

Occupancy

Carry homeowners insurance if you live in the home; carry landlord insurance if you rent out the home to tenants.

But what if you live in the house but plan to rent out a portion of it, either occasionally or long-term? Talk to your insurer to determine the best course of action. You may need to add coverage (called an endorsement) to your home insurance policy, purchase a landlord insurance policy, or carry a hybrid policy of some sort.

Personal property

While a standard home insurance policy includes personal property coverage for your belongings, you won’t get the same blanket coverage with landlord insurance.

Instead, landlord policies cover items you leave in the home for the tenant to use, such as appliances or landscaping tools. The tenant will need renters insurance to protect their own personal property, such as their furniture and electronics. You should not expect coverage for any personal items you leave behind, such as a TV or a box of collectibles in the basement.

Liability

Landlord insurance policies include personal liability protection in the event a tenant or visitor is injured on your property. Much like a traditional home insurance policy, liability coverage can help pay legal and medical costs. In this case, coverage applies if you are found negligent as a landlord (for instance, you failed to address a maintenance issue like a loose railing).

Loss of use vs. fair rental value

A standard homeowners insurance policy should include loss of use coverage. If your home is temporarily uninhabitable after a covered event like a fire, loss of use helps pay for living expenses, such as hotel costs.

For your rental property, landlord insurance usually includes fair rental value coverage, sometimes called fair rental income protection. Similarly, if your tenant must temporarily vacate your property because of a covered event, fair rental value coverage helps replace your lost rental income.

Insurance cost

Landlord insurance costs about 25% more than a standard home insurance policy, according to the Insurance Information Institute.

When can you keep your homeowners insurance, even if you rent your home?

You typically need to change your homeowners insurance in one way or another if you rent out your home, either as a long-term rental, a seasonal rental (like a summer vacation home), or even as an occasional Airbnb.

However, there are some unique scenarios where you might not need to change your home insurance to landlord insurance, including:

• Renting a single room: If you still live in your home but plan to rent out a bedroom, basement, attic, or even the garage, speak with your insurance company about the best policy for your needs. Your homeowners policy may be sufficient, or you may need to add an endorsement, purchase landlord insurance, or carry a hybrid policy.

• One-time events: If there’s a big concert or major sporting event in your city and you want to make some extra money, you might rent out all or part of your home for the weekend, just that one time. These one-off short-term rentals typically don’t require any policy updates, but ask your insurer to be safe.

• House sitting/short-term absence: If you’re away for a few weeks on vacation and have a friend, family member, or contracted house sitter or pet sitter staying in your home, you haven’t “abandoned” your home as a primary residence in the eyes of your insurer. So, you likely don’t need to update your policy. But if you plan to travel for a month or longer and are worried, contact your insurance agent to see if you should make any temporary changes to your coverage.

Do I need landlord insurance for long-term rentals?

Yes, you always need to switch to landlord insurance for a long-term rental, which is typically defined as a six- or 12-month lease with a tenant. This is a significant period in which the property is being used for a business purpose with higher risk of claims. Here’s why:

• Tenants aren’t likely to take care of your home as well as you would.

• You can’t be around all the time to keep up with maintenance and spot potential problems in advance.

• Tenants and their guests could be injured in your home, increasing your liability risk.

The price of landlord insurance reflects those greater risks. Expect to spend about 25% more for landlord insurance than you would for a standard home insurance policy.

Pro tip: Landlord insurance premiums are generally tax-deductible as a business expense. Consult a tax professional to confirm how this applies to your situation.

How does insurance work for short-term rentals and Airbnbs?

Landlord insurance isn't just for long-term rentals. Most homeowners policies exclude business use of your home, so short-term rentals typically require a separate policy, as well.

That means you might still need to update your home insurance if you:

• Have a house in a desirable location and regularly rent it out during the high-tourist season.

• Rent your home for an extended period of time while you’re traveling elsewhere.

• Regularly list your home (or a portion of your home) on a lodging site, such as Airbnb or Vrbo.

In these and similar scenarios, you might need to purchase a home-sharing endorsement for your policy or specialized short-term rental insurance. When in doubt, speak with your insurer about how you intend to use your property. They can help you determine the right course of action.

What are the risks of not updating your home insurance coverage?

Home insurance companies require you to upgrade to landlord insurance when renting out your home because of the increased risk of claims. Similarly, there’s a greater risk to you as the homeowner if you neglect to update your coverage.

Here’s what could happen if you rent out your home without switching to landlord insurance:

• Claims denial: If your home is damaged by a covered event, but the insurer determines you were renting the property, the home insurance coverage is void — and your claim is very likely to be denied.

• Policy cancellation: Some insurers may go a step further and drop your coverage immediately for “misrepresentation.”

• Mortgage complications: Most mortgages require you to maintain adequate insurance. Using the wrong policy could violate your loan terms.

• Legal liability: Without landlord insurance, you’re financially at risk if your tenant or their guest is injured and sues you to cover the costs.

Steps to take before your first tenant moves in

Before a tenant or short-term renter gets the keys to your place, here’s what you need to do to make sure you have the proper insurance coverage:

1. Contact your insurance agent: The most crucial step is speaking with your insurance company and explaining clearly how you’d like to use your property. The agent can advise on whether you need an endorsement, a new landlord policy, or a hybrid policy. They should also be able to provide a quote.

2. Require renters insurance: Your landlord insurance protects you as the property owner, but your tenants aren’t covered. Require your tenants to carry renters insurance to protect their possessions and provide additional liability coverage.

3. Document everything: Keep physical and digital copies of the lease, and thoroughly document any possessions you’re leaving behind for tenant use, such as kitchen appliances, a grill, a lawnmower, or even furniture.

Frequently asked questions

Can I have both homeowners and landlord insurance on the same house?

Generally, no. You cannot have both homeowners and landlord insurance on the same house. If you have a short- or long-term tenant renting your home, you’ll typically need to upgrade to a landlord insurance policy.

Landlord insurance includes the same kind of dwelling, other structures, and liability coverage as traditional home insurance, but the personal property coverage and fair rental value coverage included in a landlord policy offer better protection than you’d get with a standard home insurance policy.

Is landlord insurance more expensive?

Yes, landlord insurance is more expensive than standard homeowners insurance because of the increased risk of claims. On average, the Insurance Information Institute says landlord insurance costs about 25% more than standard home insurance.

Does homeowners insurance cover a basement apartment?

Your homeowners insurance may or may not cover a basement apartment; it depends on your insurer. Some insurers require you to replace your home insurance with a landlord insurance policy. Others may allow you to get an endorsement (sometimes referred to as “unit rented to others”) when only renting out a portion of your home.

What happens if my tenant causes a fire?

If you rent out your home and your tenant causes a fire, you should be financially protected against the damage if you have the proper landlord insurance policy. However, if you have a standard homeowners insurance policy, it’s possible your claim will be denied.

Importantly, your tenant’s belongings are only covered through their own renters insurance policy — not your landlord policy.