The major purpose of most landlord insurance policies is protection against loss of income in case your property becomes uninhabitable. Depending on the type of policy, insurance may cover costs of damage to property and may also cover loss of income as a result of being unable to rent the property out. Property damage coverage is sometimes known as peril insurance. More expansive policies, known as comprehensive coverage or umbrella insurance, can protect you from the costs of legal expenses and landlord liability in the event of a lawsuit, and may even offer protection against charges of defamation or discrimination.
Evaluate your situation. How much and what type of coverage you need depends on your situation as a landlord — whether you are renting a room in your home, a condo, an apartment, multiple units or a house.
Size up your renter. Leasing a room in your home to someone you know well is very different from renting out property on a long-term basis to a stranger who contacted you through a classified ad or saw your "For Rent" sign on the street.
Assess your finances. Insurance involves a definite expense in order to protect against an uncertain possibility of loss. If a disruption in rental income would mean serious damage to your overall finances, insurance that protects against income loss may be necessary. If your main concern is unanticipated and expensive repairs to your property, insurance that offers cash value (value after depreciation) or replacement value (the actual cost of replacing or repairing damaged property) should be considered. If you're concerned about possible lawsuits or other sorts of legal action that sometimes arise from landlord-tenant problems, insurance against those potential actions may be required.
Find an agent. If you're a homeowner venturing into the world of landlord-tenant relationships, your own homeowners insurance policy may be the best place to start. Contact your agent, explain that you're considering becoming a landlord, and have the agent lay out the options available to you for buying supplemental landlord insurance, or even for fully converting your homeowners policy to a landlord insurance policy. You may also want to seek quotes from other companies.