A couch, half submerged by a condo flood.

July 25th, 2018

What is (and isn’t) covered by a tenant’s insurance policy?

When you’re renting out a unit or part of your home to a tenant, you may be wondering how their insurance policy works.

Will your homeowners policy cover a basement unit? Will you need to get a separate landlords policy if you’re renting out an entire space? And, should the tenant get their own policy to cover unexpected losses?

What’s covered by your tenant’s insurance policy

Tenant insurance, also known as renters insurance, is a policy that your tenant purchases to protect their things and their things only.

As a renter, this insurance type is an affordable way for tenants to protect personal property against fire, theft and liability damages.

Landlords are not responsible for the personal belongings of a tenant provided the building itself is secure, which is why it’s important for renters to look into insurance coverage, especially if they’re renting in a risky area or older home.

If something like theft or fire were to happen without insurance coverage, the tenant would have to replace everything out of pocket. Replacing a laptop, television and entertainment system at the same time can cost a pretty penny, one that can be saved or recuperated through a renters policy.

Liability coverage for a renter also means that if something is damaged inside their unit, their insurance will cover it. Further, if someone hurts themselves in the unit there is also coverage for any medical expenses or missed work.

What isn’t covered by your tenant’s insurance policy

The tenant’s only responsibility in a rental is their personal possessions and liability within their unit proper. Your responsibility as a landlord is to maintain the structure and working order of the building and unit, and to step in when things need to be repaired or replaced.

The insurance coverage you’ll need as a landlord is a variation of homeowners insurance. It has premiums and deductibles and covers damage to the structure of the building. There are some differences, though.

For example, because you have no belongings in your tenant’s unit, your policy won’t have any sort of intensive contents protection. On the other hand, there are things a landlord’s policy will cover that regular home insurance won’t. A landlord policy can cover the loss of rent income if a unit is uninhabitable. It can also cover damages to multiple units caused by negligence. For example, an unchecked flood in one unit that leads to water damage in the adjacent units.

Your landlord policy needs to be equal to the value of the building’s structure, which may require an evaluation by a professional. This evaluation will ensure you will have your costs covered if the building or part of the building needs to be repaired after a loss.

Your tenant’s insurance will also only cover liability inside their unit. So, if someone slips and falls on the entrance to an apartment building, or injures themselves on a stairway or common area, the landlord is the one on the hook.

Liability coverage for landlords will come in handy to cover the costs of medical care, pain, and suffering.

Insurance is a mutual relationship

Both tenant insurance and landlord insurance work together to protect the personal and structural property of both parties.

You can suggest to your tenant that renters insurance is valuable to have, or you can make it a clause in your lease so that they must get insured if they wish to live under the roof you’re providing them.

Having both insurance types in place will save many headaches should the unexpected occur.