If a tenant’s guest falls and injures themselves, does the landlord’s insurance cover medical costs or does that fall under the responsibility of renters insurance? What if the tenant causes a fire in the kitchen damaging the walls? While the lines may seem blurred as to whose insurance covers what, there are stark differences between renters insurance and landlord insurance coverages.

In short, both parties should have insurance. Tenants need renters insurance to cover their personal belongings and landlords need rental dwelling insurance to cover the structure of the building. Plus, both parties need liability protection. Read on to find out the differences between landlord and renters insurance.

Landlord insurance coverages

Landlord insurance, often called rental dwelling insurance, covers the structure of the building rented out to tenants if damaged by a covered peril such as fire, lightning or hail.

It’s important to understand that the landlord’s insurance only covers damage to the structure of the building — not any of the tenants’ belongings inside. Sometimes landlord insurance policies cover certain personal property the landlord supplies tenants, such as a stove, refrigerator or lawnmower. However, it won’t cover tenants’ furniture, electronics, clothes or any other personal belongings.

Landlord insurance also has a level of liability coverage included to cover anything the landlord might be responsible for. It’s the landlord’s responsibility to properly maintain the property to make sure it’s safe and secure. If the tenant is injured because of the landlord’s negligence to repair something, the landlord’s liability coverage will kick in. A landlord could also be held liable for a situation in which their tenant engaged in illegal behavior and they failed to take appropriate measures to prevent it.

Landlord insurance differs from a typical homeowners insurance policy even if the rental unit is a house because a landlord's policy requires more protections, including landlord liability coverage. A landlord insurance policy typically costs around 25 percent more than the standard homeowners insurance policy.

Even though a landlord insurance policy may have increased protections, there are still fine lines as to what type of damage is covered. If a leaky sink needs repairs or the tenant has a kitchen fire that damages the walls and ceilings, the landlord’s insurance will typically cover those damages after the landlord pays the deductible. However, landlords probably won’t be covered if a tenant spray paints the walls and vandalizes the unit.

Renters insurance coverages

A tenant’s renters insurance policy covers their personal belongings and may also have liability coverage. It’s not uncommon that landlords will require their tenants purchase a renters insurance policy.

Some of the common disasters that are covered under renters insurance are fire, smoke, lightning, theft, explosion, wind storm and snowstorm. Certain types of water damage may be covered, such as a burst pipe or a water leak from the tenant upstairs. Damage to personal belongings caused by a flood or earthquake typically aren’t covered by a standard renters insurance policy, but they can be added on if you live in an area that is at high risk for these damages.

Tenants can also add floaters or riders to their policy to cover high-value items like jewelry, musical instruments or collectibles. Most policies also cover personal belongings even when they aren’t in the rental unit. For example, if they were stolen from a car or hotel room while traveling, a renters insurance policy would typically cover these instances. Renters insurance policies also generally have liability coverage to protect the tenant if someone is injured on their property.

The personal liability portion of a renters insurance policy provides protection for things the renter could be held responsible for. A common personal liability claim is for dog bites. If the tenant has a dog covered under their renters insurance policy and it bites a guest, the tenant would be liable. The tenant’s liability insurance would also cover an injury of a guest caused by a risk the tenant didn’t warn the guest about. As a host, tenants are responsible for the safety of their guests, including if tenants serve alcohol to guests.

Not all renters insurance policies are created equal, though. One of the big differences is if the policy covers actual cash value or replacement cost. Replacement cost coverage costs more up front, but it results in a bigger payout if a tenant experiences a covered loss. It will cover the cost to replace the items new whereas actual cash value coverage will cover the depreciated cost of the items. For example, if a TV that was a few years old was stolen, the renter would get less than they paid for it when they bought it. The payout likely wouldn’t be enough to fully cover a new one.

Renters insurance is important because it helps tenants recover from a disaster financially. If a theft or fire happens in the tenant’s apartment, renters insurance will help pay to replace the items damaged or lost in the peril. If a renter didn’t have renters insurance and someone broke into their apartment and stole their personal belongings, the renter would have to take on the financial burden of replacing the items out of pocket. Renters insurance is generally considered one of the most affordable types of insurance with an average annual cost of under $200.

If you’re a renter looking for renters insurance, simplify your search by checking out the best renters insurance companies to find the highest-rated companies in your area.

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