Turning a home into a rental changes what insurance you’re legally and practically required to carry. A standard homeowners policy assumes you live in the home — the moment you rent it out, that assumption breaks, and it can break your coverage along with it.
Why a Homeowners Policy Falls Short
If you keep using a homeowners policy on a property you’ve turned into a rental, your insurer can deny a claim on the grounds that the home is being used commercially — a use residential homeowners policies explicitly exclude. This isn’t a technicality that only matters in a lawsuit; it’s grounds to deny a routine fire or storm claim if the insurer discovers a tenant was living there when it happened.
What Landlord Insurance Actually Covers
Landlord policies come in tiers. A DP-1 (Dwelling Fire Form 1) and DP-2 policy cover less than a typical homeowners policy and mainly protect the structure itself against a named list of perils. A DP-3 policy steps up to open-perils coverage on the dwelling that’s comparable to a standard homeowners policy. On top of the building coverage, a full landlord policy adds liability protection, loss-of-rental-income coverage if the property becomes uninhabitable after a covered loss, and coverage for landlord-owned contents like appliances — none of which a bare dwelling-fire policy includes.
What It Costs
Landlord insurance runs roughly 15% to 25% more than a comparable homeowners policy on the same property, reflecting the added liability and lost-income exposure. In 2026, annual premiums for a standard three-bedroom, two-bath rental typically run $800 to $3,000, with high-risk states like Florida, Texas, Louisiana, Oklahoma, and Mississippi commonly landing at $2,200 to $4,600 or more.
What It Still Doesn’t Cover
Landlord insurance protects the building and your financial interest in it, not your tenant’s belongings — that’s on the tenant’s own renters policy, if they carry one. It also generally excludes flood damage the same way homeowners insurance does, so a rental in a flood zone needs its own NFIP or private flood policy layered on top. Landlords collecting rent should also factor in the cash flow timing gap between when this premium is due and when rent actually arrives.
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