New to Real Estate · Denver, CO · Member since 2019 · 2 posts · 0 votes
I own a townhome that's part of a six-unit building (five other townhomes are attached and I am in corner unit). Each of us has our own homeowners insurance policy for both interior and exterior coverage. There's a party wall agreement in place, and our HOA is very limited—they don't carry any master insurance policy and only handle trash and some parking enforcement.
Here’s my concern:
What happens if my tenant accidentally leaves a candle burning and it causes a fire that damages my unit and a few of the neighboring units? Each unit is worth about $600K.
Would the other homeowners' insurance companies try to subrogate and come after me or my insurance? What level of liability insurance should I carry to make sure I’m adequately protected—not just for the structure but also for any potential legal exposure? I am looking at worst case scenario. This is my first time investing in to real estate.
Looking for advice on how to structure coverage properly and minimize personal risk.
Accidental fire from the other unit would be covered under the other units insurance. You would need a very large umbrella to cover all the units you are concerned about. I do always recommend an umbrella policy anyways, but I don't think it is necessary to have one that would be large enough to rebuild the entire building, if that makes sense.
Something I tell all of my investor clients is to require their tenants to carry renters insurance with at least $300,000 in liability with you, or your LLC listed as the additional interest. This way if they policy cancels you are notified, and you can get paid if they are liable for something from their renters policy instead of your policy.
I own a townhome that's part of a six-unit building (five other townhomes are attached and I am in corner unit). Each of us has our own homeowners insurance policy for both interior and exterior coverage. There's a party wall agreement in place, and our HOA is very limited—they don't carry any master insurance policy and only handle trash and some parking enforcement.
Here’s my concern:
What happens if my tenant accidentally leaves a candle burning and it causes a fire that damages my unit and a few of the neighboring units? Each unit is worth about $600K.
Would the other homeowners' insurance companies try to subrogate and come after me or my insurance? What level of liability insurance should I carry to make sure I’m adequately protected—not just for the structure but also for any potential legal exposure? I am looking at worst case scenario. This is my first time investing in to real estate.
Looking for advice on how to structure coverage properly and minimize personal risk.
Hi Tim!
If your tenant accidentally causes a fire that damages your unit and the ones next to it, there’s a good chance the neighbors’ insurance companies will try to come after you to cover their losses even if it was totally the tenant’s fault. That’s just how the cookie crumbles. To protect yourself you should have at least the value of the property itself in liability on your landlord policy, and honestly, adding an umbrella policy in your own name is a smart move. And make sure your tenant has renters insurance.
It’s definitely worth having an insurance agent who understands rental properties take a look at your coverage to make sure you’re not exposed or underinsured.
Note: This information is for educational and informational purposes only and does not constitute legal, tax, financial, or investment advice. No attorney-client, fiduciary, or professional relationship is established through this communication.