Renters and Landlord Insurance: Don't Get Burned!

By Michele Allen

Whether you're a renter or a landlord, it may be difficult to sift through all the information out there to understand what's required, what you can include in a lease, and what a landlord can require of a renter. Let’s debunk some myths about insurance for both renters and landlords.
 
Common Myths About Renters and Landlord Insurance
 

Myth #1: If the house or apartment you are renting burns down, the landlord’s insurance will cover the cost of replacing your stuff.   

 
FALSE: A landlord's insurance policy, which they are required by the mortgagor to carry, covers the building and any outbuildings and protects the landlord against lawsuits arising out of accidents on the property. However, landlord insurance does not cover the personal possessions of the tenant. This is a piece of information that seems to come as a shock to many tenants after disaster strikes.
 

Myth #2: My landlord cannot require me to have renters insurance. 
 

FALSE: Although there are many federal, state, and sometimes local landlord-tenant laws that regulate a landlord's actions, no law prohibits or constrains a landlord's requirement for the renter to have renter's insurance. The landlord can list this requirement as an obligation to contract the residence. Tenants can choose not to rent from the landlord if they do not want to get insurance.
 

MYTH #3: If someone gets hurt in my house/apartment, the landlord is liable. 
 

NOT NECESSARILY TRUE: This is a question of liability. Should your cable guy trip on the front walk, he will probably sue your landlord. But if the repairman takes a swan dive over a poorly positioned coffee table inside your apartment or if your Doberman decides that his ankle looks like a chew toy, it will not be your landlord's problem. It will be yours.
 
Tenant's insurance covers personal property within a home or apartment against the same types of loss covered by homeowners insurance: fire, theft, vandalism, and water damage (but not flood damage and probably not earthquake damage, either) as well as protecting your interests should someone have an accident within your dwelling unit for which you might be held liable.


Myth #4: 
If I convert my residence to a rental, my homeowners insurance is sufficient.
 

FALSE: Risky Business. Generally, homeowners insurance will not cover claims that are filed if there is a tenant that uses the home as a permanent dwelling. If the rental is just for a few weeks or as a temporary vacation home, some policies would still provide coverage. In either case, it's paramount to notify the insurer of the alternative use of the property. If it is converting to a permanent rental, a change in policy type will most likely be required.

Myth #5: Converting my homeowners insurance to rental property insurance is too expensive to consider. 
 

FALSE: Landlord insurance protects property owners should a circumstance arise that prevents them from using their property to produce income. Circumstances may include periods of landlord-tenant disputes or damage to the property that renders it uninhabitable. Flood, fire, hurricane, snow, and ice damage are covered issues. This type of coverage also provides compensation for an attorney enlisted to resolve a tenant-landlord dispute.
 
Landlord insurance rates vary depending on the extent of coverage selected. Coverage protecting the landlord from lawsuits charging discrimination or libel are also available. The premium for this coverage is higher than homeowners insurance because it provides additional coverage beyond the risk of hazard damage to the property, but considering the events it can cover it is a valuable investment. 

MYTH #6: I won’t be able to confirm if my tenants continue their coverage. 

 
USUALLY FALSE:  As a landlord, you can require proof of insurance and ask to be named as secondary insured. If the prospective tenant does not wish to comply, they may choose to not rent; however, there is no law that prevents a landlord from making the requirement part of the lease agreement. This protects the landlord in case he is sued because of something the tenant caused and is insured for -- such as your ferret biting someone. If the landlord is named as secondary insured, he will be notified if there is a lapse in coverage. A landlord who has an insurance requirement could evict you if you fail to keep up your policy.
 

Unquestionably, any renter or landlord would be foolhardy to not carry the appropriate coverage. Without these important protections, tenants leave themselves exposed to serious loss of property or liability claims. Conversely, landlords that try to skate through with just a homeowners policy set themselves up for great loss on the occasion that a damaging event occurs while a tenant resides in the home. 

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