Dwelling Fire vs Landlord Insurance

Fire damage to your rental property can come with devastating consequences. Without the right insurance, you will be left to deal with the financial strain of repairs and the loss of rental income alone.

Having insurance is a must for multifamily property management, but it’s key to choose the right kind for your needs to ensure you are fully covered in case of a fire. Should you go with landlord insurance, or is a dwelling fire policy a better fit for what your property requires? Deciding correctly could mean avoiding unnecessary costs and keeping your investment safe.

In this guide, we’ll explore the differences between dwelling fire vs landlord insurance policies. By understanding what each policy offers, you can make the best decision to protect your rental properties effectively.

What coverage is included in a dwelling fire policy?

A dwelling fire policy is specifically designed to protect your property from the risks of fire, lightning, and other specifically named perils. This type of insurance focuses on the structure itself, rather than the belongings inside or liability coverage.

There are three types of dwelling fire policies available. Each one offers a different level of coverage, allowing you to choose the policy that best matches your specific needs and risks.

DP1 – Basic Form

The DP1 policy, or basic form, offers the most basic level of coverage. It’s a named-peril policy, offering coverage against fire, smoke, lightning, explosions, windstorms, hailstorms, and a few others. This type only offers actual cash value (AVC) coverage, which means depreciation is considered in any claim payment.

DP2 – Broad Form

The DP2 policy, or broad form, expands on the coverage offered in DP1 to include additional perils, such as burglary, vandalism, and electrical damages. This type also offers replacement cost value (RCV) coverage on claims. This means that you will receive the cost of replacing or repairing damages to the property without factoring in depreciation.

DP3 – Special Form

The DP3 policy, or special form, is a comprehensive, open-peril policy. This means that all perils are covered by the policy unless they are specifically excluded by the insurance company. Exclusions typically include intentional damage, negligence, flood, earth movement, and mold. This type also offers RCV coverage.

How much is a dwelling fire policy?

The dwelling fire policy cost will vary depending on different factors, such as the location of your property, the size, and what type you have chosen. In general, you can expect this policy to cost between $1,500 to $3,000. It’s essential to compare quotes between providers and understand what each policy covers and excludes.

What coverage is included in a landlord insurance policy?

A landlord insurance policy is a comprehensive coverage designed for individuals who rent out their property. When comparing dwelling fire vs landlord insurance policy, a landlord insurance policy covers a wider range of risks. This ensures that you are protected against various scenarios that could impact your rental business.

This is what is typically covered in a landlord insurance policy:

  • Property damage coverage: This coverage protects the physical structure of your rental property and any of your belongings used by tenants, like appliances. If a covered event, such as a fire or storm, damages your property, this insurance helps cover repair or replacement costs.
  • Liability coverage: If someone is injured on your property, liability coverage can help cover legal and medical expenses. This includes accidents ranging from slips and falls to more serious incidents.
  • Loss of income coverage: Loss of income coverage compensates you for the rent you miss out on during repairs to your building after damage from a named peril. This ensures your cash flow is maintained, helping you manage financial obligations without the rental income.

How much is a landlord insurance policy?

Landlord insurance policy costs will vary widely depending on your state, selected insurance company, and the chosen deductible and coverage limits. Landlord insurance is also typically more expensive than a dwelling fire policy based on the broader coverage.

Pros and cons of each type of policy

We compare the pros and cons of dwelling fire vs landlord insurance policies to help you choose the right policy for your property:

Pros of dwelling fire policies

With the choice between DP1, DP2, and DP3 policies, you have the flexibility to select a coverage level that aligns with your specific needs and budget. This can make dwelling fire policies more affordable than landlord insurance policies.

Cons of dwelling fire policies

The main drawback of dwelling fire policies is their limited coverage. They primarily focus on the structure itself and may not offer protection for liability issues or loss of rental income, potentially leaving you exposed to significant financial risks.

Another limitation is the lack of coverage for personal property within the rental unit. If your property is furnished or includes appliances provided for tenant use, these items might not be covered under a standard dwelling fire policy. This can pose a problem in the event of a fire or other covered peril, where the replacement of these items becomes an out-of-pocket expense.

Pros of landlord insurance policies

Landlord insurance policies provide extensive coverage, including property damage, liability protection, and loss of rental income. This comprehensive protection provides peace of mind and security against a wide range of potential risks.

Cons of Landlord Insurance policies

The main disadvantage of landlord insurance policies is their cost. They tend to have higher premiums because these policies offer more extensive coverage.

Choose the right policy for your property

Choosing the right insurance policy for your property involves a detailed evaluation of your needs and financial situation. You should carefully assess the location and condition of your property, the level of coverage that makes you feel secure, and how the premiums fit into your budget. Consulting with an insurance professional can offer you deep insights, guiding you to make the most informed decision for safeguarding your investment.

You should also encourage your tenants to take out separate insurance. Tenants with renters insurance will ensure their personal belongings are covered in the event of a fire or other peril. It will also offer liability coverage for incidents that occur within the rented space which are not covered by your policy.

FAQs about property insurance policies

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