Does landlord insurance cover tenant damages?

Landlord insurance or dwelling insurance, non-owner occupied insurance, or dwelling-fire insurance is a type of insurance policy purchased by property owners instead of homeowners insurance if they want to utilize their building or home as a business building or rental property. Landlords earn from the collection of rent from tenants. When something happens to the property, the tenant may be forced to leave, and the rent would stop while there are not tenants. Generally, there are three kinds of landlord insurance cover that provide various amounts and forms of coverage, and insurance companies and individual policies have different coverage as well. So, if you are asking whether landlord insurance should cover renter damage – it depends. 

Coverage of Landlord Insurance

There are three tiers of landlord insurance, the same way as there are three tiers of homeowner insurance policies. When it comes to landlord insurance, these tiers are called DP-1 or dwelling property insurance or dwelling-fire form 1; DP-2 or broad dwelling property insurance or dwelling-fire form 2; and DP-3 or special dwelling landlord insurance or dwelling-fire form 3. Generally, the most exhaustive landlord policy out of all the three is the DP-3, then DP-2 policies, with DP-1 providing the least amount of coverage. However, every level of policy may differ in how much reimbursement or cover they provide, what they cover, and when the it takes into action. 

Kinds of Landlord Insurance Coverage

Landlord insurance are made of five kinds of coverage, but not all policies have every kind of them. Here are the five coverage that you should be aware of:

  1. Dwelling coverage – safeguards your property from natural disasters, accidents, and thefts.
  2. Other structures coverage – safeguards detached structures such as sheds and garages.
  3. Medical payments and personal liability insurance – offers medical payments in the case that a tenant or visitor is injured around the premises of your property or if a renter files a lawsuit against you for bodily injury or property damage. The liability part of the landlord insurance policy might also offer a way for renters to receive reimbursement for damages on their personal property. For instance, if you are accountable for not repairing the damages in your property that results in a plumbing problem, the liability part of your landlord insurance will both cover your legal expenses and any settlement.
  4. Loss of rental income – Also known as fair rental value or rental reimbursement. This safeguards your rental income business from potential rent loss in the case that tenants need to vacate due to covered circumstances.
  5. Personal property coverage – safeguards your personal property that you have to leave on-site so your renters can utilize it, though the property is not owned by your renters. One example of a covered loss is when you left an appliance on your property and it gets burned down in a fire incident. Moreover, you can arrange specific objects on your policy to make sure that you are reimbursed if they are damaged. 

How Much Reimbursement does Landlord Policies Provide?

DP-1 policies are known as ACV or actual cash value policies, which means that during a loss, the insurance company will reimburse you with a marked down value of your property. DP-2 and DP-3 policies are considered as RCV or replacement cost value policies, which means that the insurance company will reimburse you with the entire cost for your property replacement. Moreover, DP-2 and DP-3 policies have larger coverage amounts compared to DP-1 policies. 

When does landlord coverage apply?

DP-1 and DP-2 policies are both termed as peril policies. This means that they will only shoulder the damages that are due to the perils written in the policy. DP-1 policies cover lesser perils compared to DP-2 policies. There are DP-1 policies that only shoulder damage from fire incidents, while more powerful policies and DP-2 policies shoulder wide array of perils, such as falling objects, hail, wind, flood, and water damage from busted plumbing, and many more. DP-3 landlord insurance is considered as an open peril policy, which means that all possible damages are paid except for those that are specifically ruled out in the policy. Landlord insurance does not cover the likes of storm water, flood, earthquake, and intentional tenant damage. 

What are damages caused by tenants?

If your tenant or renter damages your unit, your landlord insurance may cover for these, depending on the kind of policy that you have. Generally, there are three kinds of tenant damage: normal wear and tear, intentional, and accidental. 

  1. Accidental damage – this kind is sometimes shouldered by landlord insurance. Fire accidents are covered by all kinds of policies; the rest depends on the coverage of the policy. When you file for an accidental damage claim, you still need to settle your deductible. But, if your tenants have an existing renters insurance policy, you might get reimbursed under their liability insurance coverage, which covers property damage from tenants.
  2. Intentional damage — also known as malicious damage, this is sometimes shouldered by landlord insurance. An example of this is when a tenant brings a sledgehammer to your rental property, spray-paints your walls, or steals your fixtures. Does it cover this type of damage? It depends on the insurance company and the terms of your policy. This may get confusing since vandalism is shouldered in many insurance policies and vandalism is one of the most common intentional damage carried out by tenants, but several insurance companies treat it differently. However, this doesn’t mean that you don’t have any resource, you can confiscate their security deposit or file a lawsuit.
  3. Wear and tear — like homeowners insurance, landlord insurance also does not cover wear and tear. Wear and tear include the likes of stained carpets and broken fixtures. Once again, your best resort is to get their security deposit.

The Takeaway

When talking about rental property and insurance, there is a fine line between the landlord’s insurance coverage and the tenant’s insurance coverage. Landlord insurance policies don’t offer coverage for the tenant’s personal properties, regardless of the cause of damage. But, if the tenant files a lawsuit for damage to their personal belongings, the liability part of your landlord policy will be spent on your legal expenses and settlements. This is the primary reason why most landlords require their tenants to get renters insurance and put on their lease or tenancy agreement that they will get reimbursed after a certain loss without the need to go to the court. In the same way as landlord insurance, renters insurance may be called open peril policy or peril policy. Tenants and renters also need their insurance – not just the landlord – to protect themselves from possible risks and damages.