How Does Landlord Insurance Help With Tenant Property Damage?

A landlord policy is written around sudden, accidental damage to the building from a cause the form covers, with fire and lightning the everyday examples. Whether damage a tenant caused falls inside that depends entirely on how it happened.

Landlord insurance responds where the cause of loss is one the form names, and the deductible and limits apply as they would to any other claim.

Tenant damage and habitability allegations are different claims, and they are easy to confuse. One is about what a tenant did to the property; the other is about what the property failed to provide. Habitability allegations are the ones not to assume about, because many California landlord and general liability forms now carry a habitability exclusion. Knowing which kind of claim you are facing matters.

Does landlord coverage cover tenant-caused destruction?

Accidental damage is the part most likely to be reached. If a tenant accidentally starts a kitchen fire, the repair cost and the rent lost while the unit is unusable are the kinds of loss a landlord policy is built to answer, subject to its limits and deductible.

Preservation of income

Fair rental value, sometimes called loss of rents, replaces rental income while the property is repaired after a covered physical loss. It is usually limited both by a dollar amount and by a period, and both appear on the declarations page.

Occasionally landlords mistakenly believe the coverage compensates the tenant’s temporary relocation costs. It does not. Those costs sit with the tenant, and the policy written for them is renters insurance. That is the practical reason many landlords require proof of it in the lease: it gives the tenant somewhere to turn that is not the owner.

Deliberate damage

Damage done on purpose is treated differently from an accident, and forms vary more here than they do on accidental damage.

Vandalism is usually covered, with one precondition landlords are caught by often. Many forms suspend or cut back vandalism, glass, and water damage once a property has been vacant beyond a stated period, commonly 30 or 60 days. A unit sitting empty between tenancies can therefore be in a different coverage position from an occupied one, so it is worth reading the vacancy provision before a turnover rather than after a claim.

Recovering the cost of tenant damage

Landlords’ insurance generally responds to accidental damage to the building. Wear and tear is a different matter and sits outside the policy entirely. Deterioration over time is a maintenance cost, not an insured loss, however expensive it becomes. What may respond is sudden accidental damage severe enough to take the unit off the rental market.

Where fair rental value sits on the policy, it responds to rent lost during repairs following a covered loss. Note the precondition: there has to be covered physical damage first. A tenant who simply stops paying is a collection matter, and the deposit or a claim against the tenant is the route there rather than the policy.

At Schneiderman Insurance Agency, we talk clients through what a policy covers and where the gaps typically sit. To learn more about how we can help you, please contact our agency at (818) 322-4744 or request a quote online. Topics and coverage discussed in this article are not guaranteed, consult with your agents to determine what your policy does and does not cover.

Disclaimer

This article is provided by Schneiderman Insurance Agency for general informational purposes only. It is not legal, tax, financial, claims, or coverage advice. We are licensed insurance professionals, not attorneys, accountants, or financial advisors, and nothing here should be relied on as a substitute for advice from a qualified professional in those fields. This content is general in nature and is not a review of, or a recommendation for, any individual reader’s specific insurance needs, policies, or circumstances. Insurance coverage depends entirely on the specific terms, conditions, endorsements, exclusions, limits, underwriting eligibility, carrier, and facts of each situation, and the actual policy language always controls. We do not guarantee any coverage, pricing, eligibility, underwriting approval, or claim outcome. Reading this article does not create an agent-client relationship. To understand how these issues apply to your situation, please review your own policy and speak with a licensed insurance professional, and consult legal, tax, or financial advisors where appropriate.