Renters Insurance vs. Landlord Insurance: What's Covered?
For landlords and renters, it’s hard to sift through all the legalese out there when it concerns renters and landlord insurance. It takes some research to understand exactly where the responsibilities fall.
But to get started, know these basics. Landlords and renters should have their own insurance policies, and separately, they should cover loss from fire, theft, vandalism, and water damage. There is some coverage for flooding and earthquakes, but they’re often separate from the traditional policy.
Now, let’s debunk some myths about insurance for both renters and landlords.
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What Tenants Should Know About Renters Insurance
Myth #1: If the house or apartment you are renting burns down or is destroyed by a natural disaster, the landlord’s insurance will cover the cost of replacing your stuff.
FALSE: A landlord's insurance policy, which their mortgage lender requires them to carry, only covers the physical building and any outbuildings. It also protects the landlord against lawsuits stemming from accidents on the property.
The landlord’s insurance does not cover the tenant’s personal possessions. Unfortunately, this information shocks many tenants after disaster strikes, which of course, is the worst time to find out they’re not covered.
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 what a landlord can and can’t do, no law prohibits or constrains a landlord who requires that tenants have renters insurance. The landlord can list this requirement as an obligation in the lease. Tenants can choose not to rent from the landlord if they do not want to buy insurance.
Myth #3: If someone gets hurt in my house/apartment, the landlord is liable.
NOT NECESSARILY TRUE: This is a question of liability. If your cable guy trips on the front walk, he’ll 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. Renters insurance protects your interests should someone have an accident within your house.
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What Homeowners Should Know About Rental Property Insurance
Myth #4: If I convert my residence to a rental, my homeowners insurance is sufficient.
FALSE: This is risky business. Generally, homeowners insurance does not cover claims if a tenant uses the home as a permanent residence. However, some policies could provide coverage if the rental is just for a few weeks or a temporary vacation home. In either case, it's essential to notify the insurer of the alternative use of the property. If it is converting to a permanent rental, a change in policy type is most likely required.
Homeowners, there’s more to know: Tips for Choosing a Homeowners Insurance Policy.
Myth #5: Converting my homeowners insurance to rental property insurance is too expensive to consider.
FALSE: Landlord insurance protects property owners if something happens 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 typically covered issues.
Landlord insurance also provides pay for an attorney if needed to resolve a tenant-landlord dispute, including discrimination or libel. The premium for this kind of insurance is higher than typical homeowners insurance because it offers coverage beyond the risk of hazard damage to the property. However, considering the events it can cover, it can be a valuable investment.
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MYTH #6: I won’t be able to confirm if my tenants continue their coverage.
USUALLY FALSE: The landlord can require proof of insurance and ask to see updated documents on a regular schedule. There isn’t a law that prevents a landlord from making these check-ins part of the lease agreement. The check-ins protect the landlord from gaps in the coverage on the off chance they’re sued because of something the tenant caused and is insured for—such as the pet ferret biting someone. A landlord who has an insurance requirement could evict tenants that fail to keep a current policy.
Unquestionably, any renter or landlord would benefit from adequate renters and landlord insurance. Without these critical protections, tenants leave themselves exposed to severe property loss or liability claims. Landlords also risk substantial loss if a damaging event occurs while skating through the lease with just a homeowners policy.
If you're a homeowner planning to rent your home, see our free guide below created just for you!