Duplex Insurance: How it Works and What it Covers

As an investor, you may be wondering if you need a specific type of insurance to protect your duplex.

Duplex insurance is often misunderstood by property owners, leading to the purchase of the wrong coverage. It is important to understand how to insure this type of property, from what it is and how it works, to your checklist for getting the right coverage.

This article will provide you with all the information you need to make an informed decision.

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What is Duplex Insurance?

Duplex insurance is insurance coverage for a single structure that has two independent units. In some places, a duplex is known as a two-flat. Duplex units can share a common dividing wall, or one of the units may be on top of the other. Given the nature of the building type, which is quite different from single-family home properties, the insurance aspect of duplexes can be confusing for many property owners.

Most insurance providers will cover the primary structure of the duplex against common perils like fire and smoke, lightning, vandalism, as well as wind and hail. In addition, the insurance company will also have coverage for liabilities and loss of use if the property is deemed uninhabitable and is under renovations.

However, duplex insurance coverage will depend on the ownership and occupancy of either side of the duplex. There are 3 possible scenarios to consider when insuring a duplex:

1. You own one or both units in the duplex. One of the units is owner-occupied, and the other unit is not rented out.
2. You own both of the units. One is owner-occupied as a primary residence, and the other is rented to a tenant.
3. Both units are tenant-occupied, and neither unit is your primary residence.

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Duplex Insurance for Owner-Occupied Property

Do you own a duplex, and is it your primary residence? If you occupy both units and don’t rent out one of the units to a tenant, a homeowners policy is usually the best insurance coverage.

A homeowners policy can be either a named-peril or open-perils type of coverage. A named-peril policy provides coverage for specifically named perils, whereas an open-peril policy covers damage by any peril, unless specifically excluded.  Both types of policies cover the duplex’s structure and additional structures on the property. They also provide coverage for personal property. The open-peril type of policy is the most comprehensive insurance policy for owner-occupied properties.

However, even an open-peril policy generally has some exclusions:

• War
• Power failure
• Neglect
• Earth movement
• Ordinance or law
• Flood coverage

In addition to covering the duplex’s primary structure, a homeowners policy also provides coverage against additional structures, like fences and pools, contents, liability, and loss of use. The loss of use coverage provides payments for living expenses, like accommodation costs when you temporarily move out of the property during repairs made in connection with a covered peril.  

If you own and occupy only one unit of the duplex, your only claim under the homeowners policy is to the portion of the property you occupy. In this case, you can only get a homeowners policy for your unit unless the homeowners policy has a specific rider or endorsement that provides coverage for the tenant-occupied unit.

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How to Insure a Duplex That is Rented Out

People frequently purchase duplexes for real estate investment purposes. Others buy their duplexes as their primary residence and rent them out when they upgrade to another property or need extra income from the additional unit.

As a duplex owner searching for insurance coverage, how do you insure your duplex when renting it out? When searching for the best insurance coverage for your duplex, the most important question is:

Are you renting one of the units and living in the other, or are you renting both of the units out?

The occupancy of the units - owner-occupied vs. tenant-occupied - determines the type of duplex insurance policy you'll need and the cost of the annual premium.

Duplex as a rental property

If you own and rent out the entire duplex or a single unit of the duplex, a landlord policy would be the best insurance to have. This is made explicitly for tenant-occupied properties. There are different landlord policies, but a named-peril policy (DP-3) is the most common coverage among landlords.

With a named-peril landlord policy, the insurer covers the property’s structure from the most common perils. However, any perils not named in the policy are not covered and there can be other exclusions. These include flooding, earthquakes, mold, government action, and war. That said, you can usually  purchase additional coverage for some of the excluded perils as separate policies or riders for your landlord insurance.

In addition to covering the primary structure of the duplex, the DP-3 policy may also cover additional structures, liability charges, and loss of use. Some landlord policies will cover personal contents, while others exclude these. In most cases, the only contents the insurance will provide coverage for are those that landlords offer together with the property for services, such as appliances that belong to the owner or landscaping equipment stored on-site.

Unlike the loss of use in the homeowners HO-3 policy, where you are compensated for extra living expenses, in the landlord DP-3 policy, you will receive compensation for the loss of income so long as the duplex is  uninhabitable from a covered peril. The insurer then reimburses the rental income during renovations that you’d otherwise receive were it to be occupied.

Mixed-use duplex

A duplex is mixed-use if the owner occupies one unit as a primary residence and the other unit is tenant occupied. If your duplex is mixed-use, you may need both homeowners (HO-3) and landlord (DP-3) policies.

If two policies are required, the HO-3 policy will only apply to the side of the building you are occupying, while the DP-3 policy applies to the rental side of the duplex. Some landlord policies and some homeowners policies will cover both your owner-occupied unit and your tenant occupied unit with the right additional endorsements added to the policy.

As a rule of thumb, most insurers will require a homeowner’s coverage for the unit you occupy and landlord insurance for the unit you rent out.

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Tips for Choosing the Right Duplex Insurance Policy

As complicated as it might seem, choosing the right duplex insurance policy can be surprisingly easy when you keep a few things in mind:

• First, it is essential to note the usage of the duplex. Are you residing in the property, renting it all out, or using part of it as your primary residence? The occupancy type is usually the defining factor in getting homeowner’s or landlord insurance coverage.
• Second, it is also important to work with a professional. This could be an insurance agent or an online broker specializing in landlord insurance for duplex properties.

Be sure to be up-front with your agent or broker on the occupancy aspects of the duplex. This way, they can ensure you get the right coverage for the property, whether it is owner-occupied, tenant-occupied, or mixed-use.

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How to Find the Best Duplex Insurance Policy

There are a few different methods you can use to find the best duplex insurance policy:

Insurance broker

Working with an insurance broker specializing in landlord insurance for duplex properties. This is often the best way to get the most comprehensive coverage at the most competitive rates. Insurance brokers have access to a wide range of insurers, so they can shop around and get you the best deal possible.

Captive agent

Working with a captive insurance agent who represents only one insurer. While this may be convenient, it limits your options, and you may not receive the best coverage or rate.

Shopping around

Shopping around and comparing quotes from different insurers yourself. This can be time-consuming, but some landlords feel it is worth the extra effort.

No matter which method you choose, be sure to compare quotes from at least three different insurers to get the best deal on duplex insurance.

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Where to Get the Best Deal on Duplex Insurance

If you're looking to save money on duplex insurance, consider using an online insurance broker like Obie. Insurance brokers make it easy to compare rates from different insurers, so you can be sure you're getting the best deal.

As a landlord, it's crucial to have insurance for your duplex if there are ever any accidents or damages. Obie provides insurance coverage for landlords in all 50 states and has insured more than $4 billion in property to date.

Getting started with Obie is easy. First, go to their website and enter your property address to receive an instant quote. Then, you can choose the coverage that best suits your needs and budget.

‍Visit Obie's website now to get started.