Dwelling

• Like standard homeowner's insurance, landlord insurance protects the building from a list of covered perils usually including fire, theft, falling objects and wind damage, though every insurer defines what its policies cover and exclude. Some landlord policies may cover damage done by the tenants, which a standard homeowner's policy will not do. Buy enough dwelling protection to fully rebuild the structure if it is totally destroyed.
  
  

Contents

• As a landlord, you probably don't have many belongings inside your rental property. Most of the things inside the home likely belong to your tenants. However, you may have appliances, furniture or other items there that you want to protect. Landlord insurance offers protection for your belongings only, so the contents coverage tends to be much lower than that on a standard homeowner's policy. Your tenants must purchase a renters' insurance policy to protect their own things.
  
  

Lost Rents

• If your rental property is damaged or destroyed and cannot be inhabited until the repairs are complete, you will lose all the potential rent you could have collected during the months of repair work. Landlord insurance typically provides lost rent coverage, so the insurance company acts as a tenant during the repair time. This way, your income stream is not interrupted because of the loss.
  
  

Liability

• Like standard homeowner's insurance, landlord coverage comes with liability insurance protection that pays for injuries and other damages for which you are responsible as a landlord. It also pays for some or all of the legal expenses that may arise out of your landlord/tenant relationship. This is a distinct advantage over homeowner's insurance, which would not pay for any such expense. If you get entangled in a legal battle with your tenants and do not have landlord insurance, you are responsible for the potentially devastating legal, defense and punitive costs associated with the lawsuit.
  
  

Cost

• The costs for landlord insurance vary tremendously according to a number of variables, including the size and age of the home; its location; the amount of coverage you buy; and your age, claims history and credit rating, where use of credit scoring is allowed by law. However, the "Insurance Journal" reports that Allstate Insurance charged an average of $650 annually for a basic landlord policy package in 2009. Speak with a tax professional, because you may be able to deduct the premiums as a business expense.