What Exactly Does Renters and Landlords Insurance Cover?
Like many landlords, you may require tenants to have renters insurance. But for the best possible protections, you'll want to have both renters and landlords insurance. You'll want to be sure your landlords insurance fully covers your property. Without a complete understanding of your policy's limitations, you might get caught without the safeguards you need.
The goal of renters and landlords insurance policies is to restore things back to normal if problems arise. Make sure that the policy you carry has adequate limits to cover that expense. The right coverage is critical, especially if you have a mortgage on the property. You'll even find that most mortgage companies require it.
They have different goals and limitations
As a landlord, your top priority is the structure of your rental property. This means everything from the walls to the roof and the permanent structures and systems for the property. This can prove important if your tenant accidentally damages the property. You may also want to include in your landlords insurance coverage for loss of rent, which can replace rental income lost while the home is being repaired.
Your renters, on the other hand, carry insurance to cover the cost of their personal belongings. Most policies include possessions such as clothing, sports equipment, electronics and jewelry. The protection is inexpensive but provides a great deal of security for renters, who typically have less wealth than homeowners.
How the policies work together
While renters and landlords insurance cover different things, they combine to create a complete safety net for both renters and landlords. Keep in mind the appropriate deductibles would have to apply before any expenses would be covered. Here's a quick look at some common scenarios:
|Incident||Renters Insurance||Landlords Insurance|
|Power surge blows out the refrigerator||Covers loss of food||Replaces refrigerator|
|Fallen tree limb crushes air conditioner||May cover temporary housing||Replaces compressor|
|Broken pipe floods
|Covers costs of cleaning||Replaces carpet and sofa, covers damages to walls|
What renters insurance covers
Comprehensive renters insurance usually covers personal belongings like furniture, computers, clothes and jewelry and the renter's appliances. Renters insurance also covers property if it's stolen while not at home — like a computer taken from a renter's car.
Depending on the policy, other covered incidents can also include:
- Housing while repairs are made — this is called a “loss of use" rider
- The cost of food, if lost due to a broken refrigerator
- Loss of items stored off site such as in a storage facility
Landlord coverage to consider
Like all insurance, landlords insurance benefits are limited by the coverage you select. It's important to choose the protections that fit your circumstances. You'll need to discuss the pros and cons of each with a qualified insurance agent to find what coverage best services you.
Covered incidents include physical damage to the property. However, these costs can add up quickly if caused by a natural disaster.
This protects you from cost associated with injury to tenants or visitors due to your property. For instance, if a loose stone on a pathway causes someone to fall, they can file a claim against your insurance to cover their medical expenses. Renters insurance may also cover this type of claim.
Loss of rent rider
Since your property is a business interest, consider the impact of lost rent. Especially if you have a mortgage on your home, your expenses will continue even if you're not able to collect rent. Loss of rent coverage can help offset this loss for a relatively low cost.
Having adequate landlords insurance coverage is a fundamental principle of managing your rental property effectively. With both renters and landlords insurance, you and your renter will have all the safeguards needed to handle any unexpected situations.
Check out other basic landlord responsibilities that will help keep you ahead of the game.