Tenant Vs. Landlord
Thursday, June 17
This is a very common question asked by tenants and landlords. Most people who are renting their home from someone else my have little or no experience with insurance or may have never needed to make a claim so they are unaware as to what is covered by a landlord insurance policy or a renters insurance policy. Hopefully we can put together some information that can be helpful to the tenant and the landlord when thinking about what insurance to buy.
A landlord insurance policy is designed to insure the interests of the landlord. The landlord owns the building and receives rent from a tenant if the property is occupied. In the event of a fire the landlord can suffer losses to include damage to the building, damage to other structures like a garage or shed, loss of rent if the tenant can’t live in the property due to a covered loss, or even a liability claim should someone get hurt on the property and the landlord is found to be negligent. Now lets break down the coverages a little more to make it a little more clear.
Building or Fire Insurance. A basic policy will insure the building for damages resulting from a fire. The fire can be the fault of the landlord, the insured, or something else entirely. Other hazards that may cause a loss are wind, hail, vandalism, malicious mischief, and leaky pipes. Other hazards are not automatically covered on a basic fire policy and may have to be purchased in addition to the fire coverage. If the loss is the result of the tenants negligence the landlord may be covered as long as the policy is written as a tenant occupied property and the cause of loss was a covered peril. Perils can be fire, wind, hail, VM&M, or leaky pipes.
Other Structures. This coverage is for any structure owned by the landlord that is not attached to the house. A detached garage, shed, or fence would be an example of an other structure. All the hazards or covered losses would be the same as the building coverage. Other structures is not always an automatic coverage and may have to be purchased separately on the policy.
Landlords Contents. This would cover contents of the landlord to include a stove, dishwasher, or other appliances or property owned by the landlord and left for the use of the tenant. This property is covered on the contents portion of the landlords policy up to the specified limit. Not always an automatic coverage and may have to be purchased separately on the policy.
Loss of Rent. This is often a misunderstood coverage. Loss of rents provides coverage for the landlord if the property is damaged due to a covered loss and the tenant can not live in the property until it is repaired. The loss of rents pays the landlord lost rents that they can not collected from the tenant because the house is unlivable. The coverage does not provide housing or living expenses for the tenant, only the rents the landlord can not collect from the tenant while the property is being repaired. Coverage for the tenant to provide housing is covered under a tenant or renters insurance policy which we will discuss later in this post.
Medical and Liability Coverage.These are actually two different coverages and are usually tied together. Medical coverage can be thought of as first aid coverage. Provides an injured person with basic medical coverage to the amount stated in the policy which usually starts at $500. It could be more, depends on the policy amount. Liability insurance would be for more extensive medical treatment and/or pain and suffering. This is the amount a person, either the tenant or a guest, could sue the landlord for injuries caused by the property of the landlord. Common lawsuits brought against landlords are for poor maintenance of the sidewalk, driveway, porch, or the home. Cracks, missing rails, or other property hazards can result in a liability claim to the landlord. Even if the person was a guest of the tenant, the landlord can still be responsible for their injuries.
Many landlord insurance policies offer other coverages also. Additional policies may have to be purchased if you need earthquake, flood, or mine coverage. These are federal programs that are sold by insurance companies but are not usually covered under a landlord insurance policy.
Renters Insurance or Tenant Insurance.
A renters insurance policy is a policy purchased by the tenant and is separate from the landlords insurance policy. The renters insurance policy covers the contents owned by the tenant, loss of use due to a covered loss, tenants fire legal liability limit which actually provides coverage for the landlord, and liability coverage should someone be hurt or injured due to the fault or neglect of the tenant. A typical renters policy will cost about $10 to $50 a month depending on the company and the coverages offered. Now lets break these down a little more.
Contents. This is coverage is for a tenant should they lose the things they own due to a covered loss. If the home catches on fire and the tenant has damage to their clothes, furniture, and other possessions, the policy would cover the loss up to the amount of coverage. A basic renters policy will usually cover $10,000 of the tenants possessions but can be more or less.
Loss of use. This is almost like the loss of rents coverage except the tenant is the person who receives the benefit. If a property is unlivable due to a covered loss, the insurance company will pay for the tenant to live somewhere else like a hotel until the property is repaired or the coverage runs out. Most policies state how much or how long they will pay for alternate housing while the property is being repaired. To summarize the difference, loss of rents is on the landlords policy and pays the landlord for lost rents, loss of use is on the renters policy and provides housing or money to the tenant.
Fire Legal Liability Limit. This is coverage that provides money to the landlord should the tenant be responsible for the claim. If a tenant is smoking in the home and causes a house fire resulting in $25,000 in damage, the landlord can sue the tenant for the damage to the property because it was the tenants fault. The insurance company for the tenant would represent the tenant and pay for the damages to the landlord if it is a covered peril such as fire. In most rental contracts a landlord can charge a tenant for damages to the property and they collect a security deposit to help offset a small amount of damage. So fire legal liability limit coverage is on a tenants policy and pays the landlord if the tenant is responsible for the damage and the damage is a covered peril. The policy probably will not cover intentional damage to the property as an example. Most landlords require tenants to have a renters insurance policy for this exact reason.
Liability Insurance. This works the same way as it does for the landlord but since the tenant is not usually responsible for the general maintenance of the property this would cover negligence of the tenant like a trip hazard such as a rake left in the yard.
We hope you found this information to be useful. We have an outside blog at http://blog.mylandlordinsurance.com if you find our thoughts interesting. This is not an all inclusive list and does not represent what an insurance policy will or will not cover. These are general terms and should only be used as an educational guide. Always consult your agent and read your policy to make sure you have the coverage you need and want.