Landlord & Rental Property Insurance Glossary

Landlord insurance: A policy built for a rented property rather than an owner-occupied home, covering the building, the owner's liability, and the rental income. It is the right policy for a rental; a homeowners policy is not. Learn more →
Dwelling fire policy (DP1, DP2, DP3): The family of policy forms commonly used for rentals. DP1 is the most basic and often settles at actual cash value; DP3 is the broadest, covering more perils on an open-perils basis and typically settling at replacement cost. The form you hold changes what is covered and how it pays. Learn more →
Loss of rents (fair rental value): Coverage that replaces your rental income when a covered loss makes a unit unrentable, for the time it takes to repair. It is the coverage investors most often miss or under-size, and it should reflect current rent. Learn more →
Replacement cost: The cost to rebuild the property with like kind and quality at today's prices, with no deduction for age. It is the right basis for a rental and what lenders require, because it reflects what reconstruction actually costs. Learn more →
Actual cash value (ACV): Replacement cost minus depreciation, the property's value after age and wear. An ACV settlement, common on older roofs, can pay far less than it costs to replace what was damaged. Learn more →
Coinsurance: A clause requiring you to insure to a stated percentage of replacement cost. If your limit is below that threshold at a loss, the insurer pays only a proportion of the claim, even a partial one, and you absorb the rest. Learn more →
Vacancy clause: A provision that reduces or suspends certain coverages once a property has been vacant beyond a set period, commonly sixty days, leaving losses during the empty stretch limited or excluded. Learn more →
Named insured: The person or entity the policy actually covers. If a rental is owned by an LLC, the LLC should be the named insured; a mismatch with the deed can be raised by the insurer at a claim. Learn more →
Investor umbrella: A policy that adds a large, low-cost layer of liability above your landlord and other policies, protecting personal and portfolio assets when a serious claim exceeds the underlying limits. Learn more →
Ordinance and law: Coverage that pays the extra cost of rebuilding to current building codes after a covered loss, which a standard policy does not cover on its own. It matters most on older buildings. Learn more →
Water backup: An endorsement covering water that backs up through sewers, drains, or sump pumps, which a standard policy generally excludes. Common and under-bought on older and multi-unit properties. Learn more →
Builders risk: Coverage for a property under construction or renovation, including the structure and materials and work in progress, against perils like fire, wind, and theft. Used for rehabs and fix-and-flip projects. Learn more →
Flood insurance: A separate policy covering flood damage, which is excluded from every standard landlord policy. Required by lenders in mapped high-risk zones, and worth considering well outside them. Learn more →
FAIR Plan: A state-backed insurer of last resort that provides basic property coverage for properties that cannot find coverage in the normal market, usually because of wildfire risk. It generally excludes liability and is paired with a separate policy. Learn more →
Additional insured: Status that extends a liability policy to protect another party. A landlord may require it on a tenant's renters or business policy so the tenant's insurer responds to claims arising from their use of the space. Learn more →
Renters insurance: A tenant's own policy covering their belongings and liability. Requiring it in the lease, with the landlord as additional insured, reduces the owner's exposure to tenant-caused losses. Learn more →
Mortgagee clause: Policy wording that names the lender on the property policy with protections, including payment for a covered building loss. Lenders require it on a financed rental. Learn more →
Blanket vs scheduled coverage: Scheduled coverage sets a separate limit per property; blanket coverage shares one limit across several, so the full limit can respond wherever a loss occurs. Blanket can soften underinsurance across a portfolio. Learn more →
Force-placed insurance: Coverage a lender buys on your property and bills to your loan if your required policy lapses. It protects the lender, not you, and is usually more expensive and far narrower. Learn more →
Premises liability: The owner's exposure to claims when a tenant, guest, or visitor is injured on the property, including common areas. It is why liability limits and an umbrella matter on a rental. Learn more →

The terms, in plain English.

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