A rental needs a landlord (dwelling/fire) policy, not a homeowner's policy — insure a tenant-occupied property on the wrong form and a claim can be denied outright. Insurance is also one of the few operating costs where the cheap option can cost you the building.
What a landlord policy covers
Three cores: the structure (rebuild after fire, wind, and named perils), liability (a tenant or guest injured on the property — typically $300,000–$1,000,000 of coverage), and loss of rents (rent replacement while the unit is uninhabitable after a covered loss — confirm it's included, not optional). Your policy does NOT cover the tenant's belongings; require renters insurance in the lease, which also gives their insurer someone to pay besides you.
The choices that matter
Replacement cost vs actual cash value: ACV pays depreciated value — an old roof might yield a fraction of replacement — so prefer replacement cost even at a higher premium. Deductible: raising $1,000 to $5,000 often cuts premiums meaningfully and matches how you should use insurance anyway (catastrophes, not maintenance — small claims raise premiums and can get you non-renewed). Exclusions: flood and earthquake are separate policies; sewer backup and water damage riders are cheap and cover the most common ugly claim. An umbrella policy adds $1M+ of liability across your whole portfolio for a few hundred dollars a year.
Worked example
A $300,000 duplex: replacement-cost dwelling coverage at $340,000 (rebuild cost isn't market price), $500,000 liability, 12 months loss of rents, sewer backup rider, $2,500 deductible — roughly $1,900/year in a typical market. A kitchen fire causes $60,000 of damage and four months of vacancy: the policy pays the rebuild minus deductible plus about $12,400 of lost rent. The "cheap" $1,100 ACV policy would have paid tens of thousands less on the same claim.
When this rule of thumb breaks
Premiums have repriced hard in storm- and fire-exposed states — in parts of the US, insurance has jumped enough to flip marginal deals negative, so get a real quote before you buy, not after. Vacant properties need a separate vacancy policy once empty beyond a stated period (often 30–60 days). Named insureds must match ownership — a property deeded to your LLC but insured personally invites a denied claim. And review coverage annually: construction costs rise, and a policy sized three years ago may quietly underinsure the rebuild today.