Renter's Insurance Liability and "additional insured"

Columbus, OH · Member since 2016 · 22 posts · 8 votes

Our insurance guy is telling us that we should have a requirement in our lease that the renter have renter’s insurance for $500k liability. He said most policies are at $300k, but it’s only an extra $10/yr to bump up to $500k. He also said to include in the lease that the landlord must be listed as an “additional insured” on the renter’s policy. If the renter does not pay their insurance bill, then we will get notification.

Has anyone done this? I've heard of landlords requiring renters insurance, but I've never heard of requiring the Landlord to be an "additional insured" on the policy. That seems wacky, but I'm new to this and I know nothing.

Thanks!

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Jason BottPro Member

Insurance Agent · Nationwide · Member since 2014 · 2k+ posts · 1k+ votes

@Anna Milligan as you can tell from the above responses from around the US, this is a common practice. The only differentiator is that some states allow landlords to be "Additional Insureds", while other states only allow "Additional Interest".

The Additional Interest language is meant to give you notice if the policy changes, but you have no rights under the policy.

The Additional Insured language adds you to the renters policy. In this case, you have rights to files claims under the policy. Best example would be a slip and fall. If the tenenat is at fault, You would want to try and have the claim be covered by the renters policy.

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Kim Meredith HamptonBusiness Member
Real Estate Broker · St Petersburg · Member since 2014 · 2k+ posts · 2k+ votes
9y
It's all true, I manage over 900 homes and started requiring tenants this year for a renters policy and we are names additional insured. A copy has to be provided to us prior to them moving in. This is a great extra line for you if they cause damage to your home, and of course for their personal belongings
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Matt Clark
Roanoke, VA · Member since 2014 · 404 posts · 203 votes
9y
Anna Milligan yes, it's common for the property owner to be named as an additional insured. That way you should receive a notification if their coverage lapses, but in reality it doesn't always happen.
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Ralph R.
Investor · Bethel, AK · Member since 2013 · 1k+ posts · 852 votes
9y
I'm confused here. In Colorado I recieve a break on my landlord insurance because it does not cover the contents of the house. It covers the house only and lost rents as well as provides lodging for the tenant if it becomes necessary. If a tenant has renters insurance it's my understanding it covers the contents of the house only. My question is what parts of the house does it cover?? RR
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Bill S.Pro Member
Moderator
Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
9y
@Ralph R. renters insurance also covers acts by the tenant that cause damage. Let's say they leave a pan of grease on the stove and it catches on fire and causes a kitchen fire. It's my understanding that the landlord insurance won't cover those costs because it was the fault of the tenant. I was also told that the landlord insurance companies also fix these problems and then pursue the tenant for damages. Not sure that means the landlord is on the hook if the tenant is flat broke. We need some insurance people to weigh in on this.
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Jason BottPro Member
Insurance Agent · Nationwide · Member since 2014 · 2k+ posts · 1k+ votes
9y
@Anna Milligan as you can tell from the above responses from around the US, this is a common practice. The only differentiator is that some states allow landlords to be "Additional Insureds", while other states only allow "Additional Interest".
The Additional Interest language is meant to give you notice if the policy changes, but you have no rights under the policy.
The Additional Insured language adds you to the renters policy. In this case, you have rights to files claims under the policy. Best example would be a slip and fall. If the tenenat is at fault, You would want to try and have the claim be covered by the renters policy.
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Ralph R.
Investor · Bethel, AK · Member since 2013 · 1k+ posts · 852 votes
9y
@Bill S.ive seen other threads on here addressing renters insurance. I'm going to ask my agent about this. If I have the right to file on their insurance then what stops them from filing against me?? There's bad wiring on the kitchen. A fire breaks out. The fire Dept comes and puts the fire out. Who pays for the smoke damage to the brand new couch?? In the case of the grease on the stove I would think the landlords insurance would be liable regard less of the the renters action. The renters insurance might be a way for my insurance to pass the buck tho. I'll call my agent and ask. RR
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Bill S.Pro Member
Moderator
Rental Property Investor · Denver, CO · Member since 2013 · 4k+ posts · 2k+ votes
9y
@Ralph R. I can answer the smoke damage to the tenant's couch question. Renters insurance pays. Landlord and Landlord's insurance does not cover tenant's personal possessions regardless of the cause of the damage unless landlord negligence is the cause. I had a fire from a lightning strike on a nearby tree. Tenant's personal belongings were not covered by my insurance. There was smoke and water damage to tenants personal belongings and tenant or renters insurance was responsible for that.
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Ralph R.
Investor · Bethel, AK · Member since 2013 · 1k+ posts · 852 votes
9y
@Anna Milligan @Kim Meredith Hampton @Jason Bott @Matt Clark @Bill S. Ok here's what the agent told me. This is in Colorado I dunno about other states. Landlords insurance covers the house. Renters insurance covers the contents, and provides liability for the tenant. There is no coverage of the structure from renters insurance. Heres where the hitch is. If like Bill S says the tenant starts a fire. My insurance will pay the damage and then sue the tenant. Now his renters insurance is going to protect him. That's a liability claim against him. Not me as the LL. His insurance has nothing to do with my property being restored. My insurance does that. There is no gain or reason for me to force renters insurance on my tenants. My property is covered. It is to the tenants benefit and the benefit of my insurance company for them to have renters insurance. I would encourage a tenant to have renters insurance but forcing him to have it is like forcing your children to eat spinache because it's good for them. As far as a broken door or other tenant caused damages you are outta luck unless you want to sue him. RR
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Jason BottPro Member
Insurance Agent · Nationwide · Member since 2014 · 2k+ posts · 1k+ votes
9y
@Ralph R. the benefit to you is that your insurance company can recoupe the $ they paid to restore the property from the tenants renters policy. If they can not do this, your insurance premiums can go up....,sometimes through the roof.
In the past I have had some of my larger landlord policy premiums triple after a few fires.
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Derek Lacy
Insurance Agent · Maitland, FL · Member since 2015 · 397 posts · 244 votes
9y
@Ralph R. just as @Jason Bott said, this means the claim comes off of your record, or if you are an additional insured, you can just go directly against their renters policy and skip your policy if the damages are below the limit of liability. Also remember in a liability situation, you do not have to pay a deductible. So if you are like most landlords, willing to raise a deductible to save a few bucks, there might be a $2,500 or $5,000 difference on your out of pocket depending if it is claimed on your property policy or their renters policy.
Word of caution to all, the standard renters policy will only cover damage to the landlord's property for the perils of Fire, Smoke and Explosioin, all other causes of loss are excluded, meaning you will need their security deposit and lawsuit to recover your lost money. The biggest culprit I will see on this is "I allow them to have a dog/cat/ferret/snake because I made them purchase renters insurance." Unless the cat catches something on fire, there's not going to be much coverage for the animal damages.
Also keep in mind, @Jason Bott and I are good at what we do, but on a forum such as this we can only advise the standard policy. By the way, in insurance you might see a standard policy about 40% of the time, usually the underwriter adds some further condition, exclusion, limitation, etc. My 40% may be way high depending on how you consider what is an exclusion, limitation, etc.
Hopes this helps, but trust me, the more you become educated on insurance, the waters right in front of you may have cleared up, but it just muddies other waters. Like if you're both insureds on the policy through an additional insured can there be an issue with the severability of the insureds? Yep, depends if the policy is standard or not.
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Sebastian Taylor
Baltimore, MD · Member since 2013 · 85 posts · 28 votes
9y
Are you certain that if they will be able to recoup, the premiums are not going to get up?
When I apply for an insurance, I see questions about past claims, but have never had questions whether insurance company was able to get their money back.
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Ralph R.
Investor · Bethel, AK · Member since 2013 · 1k+ posts · 852 votes
9y
@Derek Lacy thanks Derrick!! I think many of the LL's on here were thinking that it was some protection against damage to the property I.E. Broken door ruined carpet. For my part I try to screen tenants well enough I don't get explosions and smoke damage very often. I also do not abuse insurance making claims on every little thing. I like the tax deductions and try to keep my premiums down, keeping the insurance for catastrophic loss. I think the adage " you don't get big by acting small" has merit here. RR.
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Ralph R.
Investor · Bethel, AK · Member since 2013 · 1k+ posts · 852 votes
9y
@Jason Bott thanks Jason for clarifying I prefer to use insurance in a catastrophic event only. As Derick pointed out renters insurance does not provide coverage for all tenant damages and I think that was what many people believe. That's what I was trying to dispel RR
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Jeff B.
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
9y
@Ralph R. "There's bad wiring on the kitchen. A fire breaks out."
Surely it is self evident that the tenant is not responsible for bad wiring, and God help us if we rent with this as a known condition.
My LL Policy (Farmers) covers the building and liability issues.
The Tenant Policy covers their personal property while on the property.
I lost an upper unit to fire and the lower to subsequent water damages. The tenant lost everything, but my policy covered the rehab and lost rents.
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Ralph R.
Investor · Bethel, AK · Member since 2013 · 1k+ posts · 852 votes
9y
@Jeff B. Jeff that's my point. Your insurance covers your loss. Renters insurance covers their loss. Two other posters did point out that in the case of fire explosion and smoke damagecaused by the tenant you could claim against their renters insurance. Renters insurance won't cover any other damages to the property caused by the tenant. RR
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Jeff B.
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
9y
Originally posted by @Ralph R.:
@Jeff B. Jeff that's my point. Your insurance covers your loss. Renters insurance covers their loss. Two other posters did point out that in the case of fire explosion and smoke damagecaused by the tenant you could claim against their renters insurance. Renters insurance won't cover any other damages to the property caused by the tenant. RR
and I should care because ....? If you've ever tried to 'coordinate benefits' you'll understand AND appreciate that getting a settlement asap allows the unit to become available MUCH sooner and with less complications
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Sebastian Taylor
Baltimore, MD · Member since 2013 · 85 posts · 28 votes
9y
What is the conclusion? We have 2 Insurance agents here... Are the premiums not going to get up for existing insurance? And, when I apply for insurance for next dwelling, does it do me any good if for one of previous claims the landlord insurance company recouped their money from renter's insurance?
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Jason BottPro Member
Insurance Agent · Nationwide · Member since 2014 · 2k+ posts · 1k+ votes
9y
@Sebastian Taylor a commercial underwriter will determine premiums for a policy based on several things, one of the major variables being losses (claims) over the past 3 to 5 years.
If you show that there was a $30,000 fire, and $25,000 was recaptured/paid by the renters policy, it's only a $5,000 loss on your record.
Now, let's say your annual premium is $10,000 for all locations. When the loss shows $5k, you were a profitable account for the insurance carrier. But @ $30,000, they paid out $3 for every $1 they collected. No insurance carrier wants to compete for bad business.
Most insurance companies will have as a requirement, or strong suggestion that the lease requires tenants to have renters insurance. If you do not, you are most likely not getting all of the discounts/credit on your account.
Hope that helps
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Sebastian Taylor
Baltimore, MD · Member since 2013 · 85 posts · 28 votes
9y
@Jason Bott, thanks, good to know.
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Patricia Hinojos
Investor · Plano, TX · Member since 2014 · 23 posts · 10 votes
9y
I was at a talk this week where an agent said, if it's important the tenant has renters insurance, one option is that you pay for it to make sure you are the "additionally insured" and roll the cost into rent if you want.
Renter's insurance is pretty cheap so I thought that was a creative option to have in the toolbox.
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