Loss of rent coverage pays when the house becomes unlivable because of a covered event. Fire, a burst pipe, storm damage. The tenant moves out while it's repaired, you lose the rent, and the policy replaces it for the repair period. It does not pay when a tenant who could live there simply stops paying. Your friend is right about that. Non-payment is a credit and screening problem, and the tools for it are deposits, screening, and eviction, not insurance.
A landlord policy is a different product from homeowners, usually written as a dwelling fire or DP-3 form. It insures the building and your liability and lost rent, and it carries no coverage for a tenant's belongings, because the tenant's renters insurance does that. It's often priced somewhat differently from a homeowners policy on the same house, sometimes lower because there's no personal property, sometimes higher because occupancy risk is priced in. Get an actual quote, and get it before your inspection period ends.
Two things people commonly add. An umbrella policy sits on top of the liability limit and is cheap relative to what it covers. Requiring the tenant to carry renters insurance with a small liability limit, named in the lease, is standard in most professionally managed houses.
The piece that catches new owners is the vacancy clause. Many landlord policies restrict or exclude certain coverage once a house has been vacant beyond a set period, often 30 or 60 days. If you buy a house and it sits empty through a renovation, you may need a vacant dwelling policy or a builder's risk policy for that window instead. Ask the carrier in writing what happens to your coverage during vacancy, and what specifically counts as vacant versus unoccupied. Those definitions and the exact rules vary by state and by carrier.
