Landlord insurance is essential for anyone who owns a property for commercial purposes. A common question that arises for landlord about their insurance policy is, does landlord insurance cover tenant damage?
The answer is “it depends.” It depends on the policy in question and the type of damage caused by the tenant. Landlords should be aware of the various caveats when taking out a landlord insurance policy.
Types Of Damage Caused By Tenants
Damage caused by tenants may lead to the same result, but for insurers the type of damage is important. Some policies will only cover certain types of damage caused by tenants. Unfortunately, many landlords only discover this after the fact when their insurer will not provide them with compensation for the damages caused.
Accidental Damage
A standard landlord insurance policy will cover the value of the dwelling’s structure, the landlord’s personal property left for use by the tenant, such as a lawnmower or snowblower, along with any liability issues. Standard landlord policies are extremely specific about what constitutes accidental damage and whether the insurer is required to dispense compensation.
Does Insurance Cover This Type Of Damage?
Accidental damage is sometimes covered by landlord insurance. For example, an accidental fire is covered as standard by landlord insurance. Even if a landlord qualifies for compensation, they will still need to pay the deductible.
In the event a claim is not covered, landlords can find recourse if the tenant has a renters’ insurance policy. In some cases, a landlord may be able to acquire reimbursement through their tenant’s liability insurance coverage. Add-ons are available for landlords who want comprehensive coverage for all incidences of accidental damage.
Intentional Damage
Intentional damage is also known as malicious damage. This type of damage occurs when a tenant willfully damages or destroys the landlord’s property or any aspect of the dwelling. For example, if a tenant steals the fixtures or spray paints the walls, this would count as intentional damage.
Does Insurance Cover This Type Of Damage?
Cases of intentional damage can be confusing because most landlord insurance policies contain cover for vandalism. If a tenant decides to take a sledgehammer to the walls, this could rightly be viewed as a form of vandalism. Within insurance circles, vandalism is treated slightly differently. Damage by tenants will often be categorized as malicious damage, rather than outright vandalism.
Landlords should ask their insurers what counts as intentional damage and whether their policy provides cover for it. If not, add-ons may be purchased to guarantee this type of cover.
If a tenant has already intentionally damaged property and the insurer refuses to pay out, landlords may also keep any security deposits taken or file a civil lawsuit for damages.
Wear And Tear
Wear and tear are a natural occurrence and will inevitably occur within any landlord’s property. Common examples include broken fixtures, broken down appliances and stained carpets or upholstery.
Does Insurance Cover This Type Of Damage?
The answer is no. Wear and tear are considered natural and inevitable, therefore nobody can be held liable. The only option is to either purchase a specific cover for these items or to keep the tenant’s security deposit.
Does Landlord Insurance Cover Damage To Tenant Property?
Landlord insurance offers no cover for tenant property. A tenant is required to take out a renters’ insurance policy in order to obtain cover for their belongings. Any property provided by the landlord for the purposes of property maintenance is, instead, covered by landlord insurance, in most instances. If a fire occurs and the tenant’s personal property is destroyed, for example, the landlord is not required to cover the costs in the event the tenant has no renters’ insurance. The only exception is if the tenant sues and the landlord is found liable for the incident.
If the tenant sues a landlord for the damage or destruction of their personal property, the landlord’s insurance policy will cover legal fees and settlements through the liability portion of the policy. For example, if a landlord is negligent and does not address faulty wiring, a subsequent fire would allow the tenant to sue for the destruction of their personal property.
This is why many landlords make it a requirement for tenants to have renters’ insurance. If a renters’ insurance requirement is written into the rental agreement, a tenant and landlord can simply settle through their insurers without resorting to court. For this reason, it is recommended new landlords write a renters’ insurance requirement into their rental policies.
Speak To An Experienced Personal Insurance Agency
Landlord insurance is a complex issue, and there are multiple types of policies with different levels of coverage. Any landlord should be aware of precisely what is covered and what is not before they accept new tenants. To find out more about landlord insurance, speak to an experienced personal insurance agency. Contact Merchant Family Agency for a free landlord insurance consultation.