No landlord wants the dreaded midnight call about a maintenance emergency. But a leaking toilet is nothing compared to the phone call I once received about one of my renter’s driving into the living room.
Yup, that’s right. My tenant’s 16-year-old son had accidentally driven straight through the front of one of my investment properties into the living room of the single family home.
Luckily, no one was hurt, but significant damage was done to the structure of the building and a handful of the tenant’s belongings. It was through this process that I learned a little more about the insurance claims process and how the right types of insurance will help you and your renters when accidents happen.
Here’s a look at how to handle a major tenant emergency and tenant-caused property damage to your investment.
3 Steps to Take After Tenant-Caused Property Damage
Step #1: Talk to your tenants (as calmly as possible).
When faced with major property damage that can put your investment at risk, it’s understandable that your emotions could negatively affect a constructive conversation about what happened.
In my case, the 16-year-old driver was facing his landlord to explain how he accidentally drove into a building. I remember him being terrified that his accident would result in an eviction for his entire family. Thankfully, these had been responsible, rent-paying tenants, and that positive landlord-tenant history made this incident easier to manage.
I believe that it was truly an accident, and I had no reason to distrust this family or the driver.
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Since I had a positive relationship with my tenants, we were able to effectively communicate about what happened and what steps we needed to take to fix the problem. We both needed to cooperate to repair the damage as quickly and cost effectively as possible.
Step #2: Call your insurance provider.
I initially assessed the damage as property damage and turned to my landlord insurance policy to find a remedy. It was during this call with my insurance agent that I was informed it would actually be the tenant’s auto insurance that would handle the claim.
Auto insurance policies typically include property damage liability insurance, which covers the cost of damage to someone else’s property caused by the insurance carrier’s car.
Property damage liability insurance takes effect when the vehicle is involved in an accident and found at least partially at fault for causing damage to another person’s property, which can include another car, house, fence, or light post.
It was up to my tenant’s auto insurance to cover the repair cost to fix the damage caused by the driver of the car that went through the living room. Auto property damage insurance will cover damage to another person’s property caused by the insured vehicle but will not cover damage to the driver’s own property.
Step #3: Contact your tenant’s insurance provider.
If a vehicle is involved in damaging your property, you need to collect the at fault driver’s insurance information.
I was able to contact my tenant’s auto insurance provider, and they agreed to reimburse me for the repair cost for the damages. I had this agreement with the insurance company before I contracted any repairs.
Repairs included a new front door, a new living room window, new exterior and interior paint to the damaged area, new interior drywall, and a new front wall to the property. The repair costs totaled $2,869.50.
The process was straight-forward and easy, and I had no issue getting reimbursed for the total cost to repair the damages.
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Other Things to Consider
I was fairly lucky in that the repairs to my damaged investment property came in relatively low and the tenant’s auto insurance policy covered everything.
An auto policy’s property damage insurance will have a coverage limit, however, and if the repairs exceeded the coverage limit, I would have had to turn to my own insurance to help cover the repairs.
Review your insurance coverage
Your homeowner’s insurance will likely pay for any and all additional damages to your home above and beyond the at-fault driver’s auto policy limits, but you need to make sure that “vehicles” are listed as covered damage-causing hazards.
Damaged tenant property
Auto insurance property damage will cover damage to another person’s property caused by the insured vehicle, but it will not cover damage to the driver’s own property. This means that all the tenant’s personal property that gets crushed or damaged by the vehicle that drives through the living room will not be replaced by the auto insurance (think TVs, computers, and furniture).
Renters insurance is the answer for replacing your tenant’s damaged property. Even if property damage is the fault of the tenant, renters insurance will cover the replacement costs. Your renters can often bundle auto insurance and renters insurance together.
To further protect your tenants, landlords and property managers can even require their tenants take out a renter’s insurance policy as a condition of the lease. This serves as one more layer of protection for your tenants and prevents landlord-tenant disputes when a tenant thinks a landlord’s insurance policy should cover damaged items.
Where does the tenant live during major reconstruction?
In my situation, only the living room was damaged and since the bedrooms and bathroom remained intact, the tenants were able to live at the property during the repair process.
If the property had become uninhabitable due to the damage, the tenant would have looked to their auto insurance provider or renter’s insurance policy to cover the cost of alternative housing, like a hotel, while the property was getting repaired.
If a property becomes uninhabitable due to some fault of the landlord, some states require the landlord to pay for alternative housing for the tenant during the repair process. Other states allows renters to break a lease without penalty if a property becomes uninhabitable.
When accidents happen, an investor should be armed with the knowledge for how to problem solve and get the property in livable condition again, with as little out-of-pocket cost as possible. Insurance plays a major role in protecting your property, your tenants, and your rental business.
In the case of tenant caused damage, auto insurance, renter’s insurance, and landlord insurance could play a role in making the claims process as simple as possible for you.
What’s your best tenant damage story?