What Is an RDP Insurance Policy?

RDP stands for Rental Dwelling Policy. You will also see the same thing called a dwelling fire policy or, in everyday conversation, a landlord policy.

It covers a residential property you own and rent to someone else, rather than one you live in yourself. Broadly, it addresses damage to the building, liability claims arising from the property, and — depending on the form and the options selected — loss of rental income while the place is uninhabitable after a covered loss.

Why it matters

A homeowners policy is written on the assumption that you live in the house. Once you rent it out, that assumption no longer holds, and a claim is the worst possible moment to discover the policy does not fit the way the property is being used.

The exposures are genuinely different, too. A landlord is not insuring a tenant’s furniture, but is exposed to liability for the condition of the premises, and stands to lose rental income the owner-occupant would never have been collecting in the first place.

What affects the answer

Which form the policy is written on. Dwelling policies come in different forms covering different sets of perils, from fairly narrow to fairly broad. Which one applies is a choice, and it changes what is and is not covered.

How the dwelling is valued. Replacement cost and actual cash value settle claims differently, and the roof can settle differently from the rest of the building within the same policy.

Whether loss of rent is included, and for how long.

Liability limits, which are a choice rather than a fixed feature. If you own more than one rental, an umbrella policy is usually part of the conversation.

How the property is actually rented. A twelve-month lease, a room let to a lodger, and a short-term holiday rental are three different exposures, and the third in particular is often excluded from a standard dwelling policy.

Who insures the tenant’s belongings. Not you. A tenant’s own renters policy covers their property, and many landlords require one as a condition of the lease.

An example

Someone inherits a house, decides to rent it out rather than sell, and leaves the existing homeowners policy in place because nothing about the building changed. The building did not change — the way it is used did, and that is what the policy is written around.

Questions worth asking

• Which dwelling form is this policy written on, and what perils does it cover?
• Is the building covered at replacement cost or actual cash value?
• Does the policy include loss of rental income, and for how long?
• What liability limit am I carrying, and should an umbrella sit above it?
• Does the policy contemplate how this property is actually rented?
• Should I be requiring tenants to carry their own renters insurance?