Landlord vs Homeowners Insurance

Occupancy decides which policy pays

Landlord insurance and homeowners insurance answer two different occupancies. A homeowners policy covers a house the owner lives in. A landlord policy, written on a dwelling form, covers a house the owner rents to someone else and adds coverage for the rent that stops during repairs.

Occupancy is the fact both contracts are built around, and it is the fact that decides which one pays. The TDI Home insurance guide describes homeowners forms as coverage for an owner-occupied residence.

A homeowners policy left on a house after the owner moves out is the expensive version of this question. The policy form says who may live there, and a claim is where that wording gets read.

What changes when a tenant moves in

A rental property changes three things an underwriter cares about: who occupies it, whose belongings are inside, and where the liability sits.

What moves off the policy when the owner moves out:

• Personal property coverage for a household’s own belongings, since the tenant’s furniture is the tenant’s to insure
• Loss of use for the owner, who is no longer living there
• The homeowners form itself, which is replaced by a DP-1 or DP-3 dwelling form

What moves on:

• Loss of rents, the rental income the property loses while unlivable after a covered loss
• Liability for injury to a tenant or a guest on the premises
• Coverage for the owner’s maintenance property kept at the site, such as appliances or a mower

How loss of rents coverage works

Loss of rents, printed on some forms as fair rental value, answers one question: what the property would have earned had the covered loss never happened. The money is the owner’s income, not a repair budget, and it stops once the unit is habitable again.

Three settings decide whether the limit holds up:

• Whether the limit reads in months of rent or as a share of the dwelling limit, which changes what a rent increase does to it
• The clock runs for the time the repairs should reasonably take, not for however long they end up taking
• Whether the figure on the declarations page still matches the rent on the lease in force

Unpaid rent sits outside the coverage altogether. A tenant who stops paying, breaks the lease or disappears is a legal problem, not an insured loss.

DP-1 and DP-3 are not the same form

Two dwelling forms carry the same name on the front and very different coverage inside, and the letter on the declarations page answers most of what a landlord needs to know.

DP-1 covers named perils only, beginning with fire, lightning and internal explosion, and wind, hail, riot and smoke are added by an extended coverage endorsement. DP-3 covers open perils on the dwelling, meaning anything the form does not exclude.

Loss settlement is the sharper difference. DP-1 usually settles the dwelling at actual cash value and DP-3 usually settles at replacement cost. Landlord Insurance in Texas and Dwelling Fire Insurance in Texas cover the two forms and the occupancy questions behind them.

The two policies side by side

Occupancy sits in the first row because every row below it follows from the answer.

	Homeowners policy	Landlord policy
Who lives there	The owner	A tenant
Form	A homeowners form	DP-1 or DP-3
The owner’s belongings	Covered as personal property	Covered only for maintenance property at the site
The tenant’s belongings	Not applicable	The tenant’s own renters policy
Rent lost during repairs	Not applicable	Loss of rents, up to the limit chosen
Somewhere else to live	Loss of use, for the owner	Not applicable
Liability	The owner’s household	The owner, for the premises, when premises liability is added to the dwelling policy

A house between tenants, seasonal, or vacant is rated differently again, and vacancy is where most dwelling claims are argued.

What to have ready before you ask an agent

Start with occupancy today, and the date it last changed. Every other answer on a Texas rental file follows from it.

Have these in front of you:

• The street address, the county it rates in, and the build year
• Occupancy status now, and the date the property stopped being owner-occupied
• The lease term and the rent it charges, where a tenant is in place
• Roof age and material, and the ages of the wiring, plumbing and heating
• Whatever declarations page the property carries today
• Any claim paid at the address, with the year and the cause

A lease and a rent figure in hand decide the loss of rents limit rather than leaving it to an estimate.

Aulona Insurance Group places the coverage this question is about: Texas Home Insurance.

Where Aulona Insurance Group is not the right fit

Aulona Insurance Group cannot place every Texas rental property, and a landlord with a closing or a renewal date should hear the limits first.

Outside what the agency places on rental property:

• Residential buildings of more than four units, which underwrite as commercial habitational property rather than on a dwelling form
• Long-vacant or heavily damaged rental property, which usually has to go to surplus lines, a market the agency cannot reach in-house
• Life, health, Medicare and disability coverage, which the agency does not write at all

Short-term rental exposure sits between the two and is placed case by case.

Luka Cenaj, the agency’s licensed principal, reads the occupancy status and the lease on a recorded call before Aulona Insurance Group takes a Texas rental property to an insurer.