Landlord insurance (DP-3 policy) covers the dwelling structure, liability, and lost rental income for investment properties. It typically costs 15% to 25% more than a standard homeowners policy on the same property. In Illinois, landlord insurance averages $1,400 to $3,000 per year depending on the property type and location.
If you own rental property in Illinois, you need landlord insurance — period. Your standard homeowners policy won't cover it. In fact, if your insurance carrier discovers you've been renting out a property covered by a homeowners policy, they can deny your claim entirely.
Landlord insurance (also called a rental dwelling policy or DP-3 policy) is specifically designed for property owners who rent to tenants. It accounts for the unique risks that come with rental properties — risks that a standard homeowners policy was never built to handle.
What Does Landlord Insurance Cover?
A comprehensive landlord insurance policy includes four key types of coverage:
1. Dwelling Coverage
This covers the physical structure of your rental property against damage from covered perils like fire, wind, hail, lightning, vandalism, and more. Dwelling coverage should reflect the full replacement cost of the building — not its market value or what you paid for it.
2. Liability Protection
If a tenant or visitor is injured on your property and you're found legally responsible, liability coverage pays for their medical bills, legal defense costs, and any settlement or judgment. We recommend a minimum of $300,000 in liability coverage, though $500,000 or more is increasingly common as lawsuit settlements continue to rise.
3. Lost Rental Income
If a covered event (like a fire or major storm) makes your property uninhabitable, lost rental income coverage replaces the rent you would have collected during repairs. This is one of the most valuable coverages in a landlord policy — it keeps your cash flow intact when disaster strikes.
4. Other Structures
Detached garages, storage sheds, fences, and other structures on your rental property are covered under this provision. It's typically set at 10% of your dwelling coverage but can be adjusted based on your property.
What Landlord Insurance Does NOT Cover
Understanding exclusions is just as important as knowing what's covered:
- Tenant's personal property. Your policy covers the building, not your tenant's belongings. This is why requiring tenants to carry renter's insurance is so important.
- Flooding. Flood damage requires a separate flood insurance policy, regardless of your property's location.
- Normal wear and tear. Insurance covers sudden, accidental damage — not gradual deterioration like aging appliances or worn carpeting.
- Intentional damage by you. Any damage you deliberately cause is excluded from coverage.
- Pest infestations. Termites, bedbugs, rodents, and other pest issues are maintenance problems, not insurable events.
How Much Does Landlord Insurance Cost in Illinois?
Landlord insurance typically costs 15–25% more than a comparable homeowners policy because rental properties carry additional risks. Here's what you can expect to pay based on property type:
| Property Type | Annual Premium Range |
|---|---|
| Single-family rental | $1,000 – $2,500 |
| Duplex | $1,500 – $3,500 |
| Triplex / Four-plex | $2,000 – $5,000 |
| Multi-unit (5+ units) | $3,000 – $8,000+ |
These ranges vary based on location, property age, condition, coverage amounts, and which carrier you choose. That last factor — the carrier — is one of the biggest variables, which is exactly why comparing quotes matters so much.
Landlord Insurance vs. Homeowners Insurance
The biggest mistake we see property owners make is assuming their homeowners policy covers a rental property. It doesn't. Here's why the distinction matters:
A homeowners policy is designed for owner-occupied properties. It assumes you live there and maintain the property day-to-day. A landlord policy accounts for the fact that someone else lives in your property, which introduces different liability exposures, maintenance challenges, and loss patterns.
If you file a claim on a homeowners policy for a property you're renting out, the carrier can — and likely will — deny the claim. Worse, they may cancel your policy entirely, leaving you uninsured on both your rental and your primary home if they're with the same carrier.
6 Ways to Save on Landlord Insurance
- Compare carriers. Different carriers specialize in different property types. Steadily, Openly, American Modern, and Travelers all offer competitive landlord rates, but which one is cheapest depends on your specific property.
- Require renters insurance from tenants. When tenants carry their own liability and personal property coverage, it reduces claims against your policy. Many carriers offer discounts when you document this requirement in your lease.
- Bundle with other policies. If you also need auto, home, or umbrella insurance, bundling with the same carrier often saves 10–20%.
- Maintain the property. Updated electrical, plumbing, roofing, and HVAC systems all qualify for better rates. Document improvements and share them with your agent.
- Increase your deductible. A higher deductible lowers your premium. For rental properties, a $2,500 deductible is often a smart choice since you'll want to avoid filing small claims anyway.
- Install protective devices. Smoke detectors, security systems, water leak sensors, and deadbolt locks all qualify for discounts.
Which Carriers Are Best for Landlord Insurance?
We represent 22+ carriers, and several stand out for rental property coverage:
- Steadily — Built specifically for landlords. Competitive rates on single-family rentals and small multi-family.
- Openly — Excellent for higher-value rental properties. Strong replacement cost coverage.
- American Modern — Flexible underwriting for older or non-standard properties.
- Travelers — Great bundling discounts if you also have auto or umbrella coverage.
The "best" carrier depends entirely on your property's specifics. That's why working with an independent agent who can compare all of them side by side is so valuable.
Should You Require Renters Insurance From Tenants?
Absolutely — and you should make it a lease requirement, not a suggestion. Renters insurance costs tenants just $15–25 per month and covers their personal belongings, additional living expenses if they're displaced, and personal liability. When your tenants carry their own coverage, it reduces the number of claims filed against your policy and creates a clear line between their responsibilities and yours.
Get Your Landlord Insurance Quote
Whether you own one rental property or a portfolio of twenty, we can help you find the right coverage at the right price. Get a free landlord insurance quote from Better Choice Insurance Group. We compare rates from 22+ carriers — including specialists like Steadily and Openly — to find you the best deal. Call (847) 908-5665 or start your quote online today.