What does landlord liability insurance cover?

Landlord liability insurance is a coverage included in most home insurance policies designed for rental property owners. Landlord insurance will include coverage for the property and some contents but one of the most important coverage items is liability insurance.

This coverage will protect the policy holder against liability damages for negligence on the part of the property owner. In most cases this coverage is needed if the tenant is injured due to the negligence of the landlord for lack of maintenance.

Looking at a landlord insurance policy you will not see what is covered but more likely what is not with the assumption that anything that is not listed will be a covered loss.

Most common claims that a tenant will make on homeowners insurance policy:

  • Lost earnings
  • Medical bills
  • Pain and suffering
  • Disability and disfigurement
  • Emotional distress
  • Personal property damage

In addition to what the tenant may get you will be covered for your legal fees including court costs. Be sure to check with your insurance agent to confirm what is covered on your landlord liability policy.

Investment property maintenance is necessary

If you need a reason to fix that broken step at your rental property getting sued might be a start. Hopefully it doesn't get this far but something as simple as a broken step or overgrown tree can lead to a lawsuit from your tenant. If your tenant gets injured or his property is damaged from your negligence you will be liable for damages caused. The safety of your renter should be a top priority. The easiest way to avoid potential problems is to fix any known problems that may cause injury to the tenant or guest.

5 Ways to Avoid a Tenant Lawsuit

  1. Keep detailed records of property inspections including pictures if possible?
  2. Frequently check the property for safety hazards including stairways, bathrooms and kitchens.
  3. Fix any problems immediately and document that you informed the tenant of the hazard.
  4. Do background checks and credit checks on your tenants to minimize the chance for a fraudulent lawsuit.
  5. Stay informed of state laws for landlords and rental properties

How much landlord liability insurance should I have?

Most rental property insurance policies will provide a basic liability coverage starting at $300,000. While this may seem like enough coverage, consider what it may cost to cover a tenant's injuries and property damages.

If a tenant were to get injured from your lack of maintenance on the property it could cost hundreds of thousands of dollars in medical bills and lost wages. In addition the tenant may want to collect for pain and suffering which can lead to even more money owed.

When considering how much coverage to have add up your personal net worth and income for the next 10 years. This will likely be over $500,000 and that should be your starting point. The fact is if you get $1 million in landlord liability insurance it will only add $20 to $60 per year on most policies so why not increase the limit.

Most home insurance companies will have maximum liability coverage of $1 million without adding a personal umbrella policy. Go with the most you can have on your landlord policy to be safe.

Does Landlord Insurance Cover Me If My Tenant Starts A Fire

All landlords get that dreaded phone call from their tenant that something is broken or needs to be fixed.  Most of these issues can be resolved by calling a plumber or handyman but what if it is more severe.  What if your tenant accidentally started a kitchen fire and it spread to the other units in the building?  Your first thought is to make sure everyone is safe then you start to think if you are covered for this kind of thing.

The worst case scenario when a fire occurs is someone is injured or even killed.  Before something like this happens you need to make sure you have the proper protection in place.  Insurance for landlords not only covers the building you own but also your liability in the event something happens at that property.  Like I said most of the time it is just a broken water pipe or a leaky faucet but if something more devastating happens there is coverage for you.

Most leading insurance companies offer a type of landlord insurance for your type of property.  The most common landlord insurance is for condos because of the sheer number of people who rent condos.  If you own a condo and rent the unit out make sure you have a landlord specific policy in place.  Most rental property investors start as the homeowner before moving out and renting the unit.  When they move often times they don’t realize they need different insurance or just forget to change it.

Landlord checklist to make sure you are properly covered as a landlord:

  • Get landlord specific insurance policy for your rental unit
  • Include the highest liability limits available, usually $1 million
  • Add sewer and drain backup coverage (usually $50/yr)
  • Add loss assessment coverage of at least $10,000(approximately $10/yr)
  • Inquire about umbrella policy to increase the liability coverage if needed

The most important aspect of having insurance is to protect against the big losses.  A broken water pipe may cost a couple thousand dollars in repairs but if someone gets hurt that could cost you millions.  If you have the right protection in place everything else will be easier to handle.

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