If You Have Tenants, You Must Know This!

Rental property is a huge investment that needs regular maintenance, care, and the right insurance to protect it from damage. But how do you protect your property? What kind of insurance do you need?

Renters aren’t usually responsible when a big appliance breaks, someone gets hurt on the property (even if it’s not the tenant’s fault), a wildfire damages the building, or the property is broken into. None of those sit with the tenant, and a homeowners policy written for owner occupancy is not the form built to answer them.

There is a further duty that sits behind all of this. California implies a warranty of habitability into every residential lease, and the standards defining it have been widening. How those changes reach a landlord’s insurance is a separate question, and one that tends to surface at claim time.

The difference between landlord and homeowners insurance

A homeowners policy is written for the place you live. landlord insurance is written for a property somebody else lives in, which changes both what is being insured and who might bring a claim.

Landlord insurance covers rental properties and your house if you want to have a business of renting out your property, while homeowners insurance covers your primary residence.

What’s in the landlord insurance?

1. Property Coverage
   This covers damage from causes named or not excluded in the form, such as fire, wind, vandalism, and sudden accidental water discharge, along with accidental damage caused by a tenant. Two exclusions matter in California and neither is optional. Earthquake is excluded from a landlord policy, and shake damage needs separate earthquake coverage or a difference in conditions policy. Flood is excluded as well, and that means rising water from outside, not a burst pipe inside the building. Wildfire is covered, though availability in higher hazard areas may route a property to the California FAIR Plan, which carries no liability coverage of its own. Whether the policy settles on replacement cost or actual cash value is worth checking on your own declarations page, particularly where fixtures and appliances are older, because that basis decides what a settlement looks like before any limit is reached.
2. Fair Rental Value/ Lost Rental Income
   This replaces rental income while the property is repaired, and the precondition is the part worth knowing. There has to be covered physical damage first, so a tenant who simply stops paying is a collection matter rather than a claim. Both the dollar limit and the period it runs for sit on the declarations page.
3. Liability Coverage
   This responds to covered claims for legal defense and medical costs when a tenant or visitor is injured because of a condition on the property, within the liability limit. 

What every landlord should confirm

Five things are worth establishing before a tenancy starts rather than after a claim:

• Does the dwelling limit reflect what it would cost to rebuild today?
• Is fair rental value on the policy, at what limit, and for how long?
• Does the policy describe how the property is actually occupied now?
• Are earthquake and flood arranged separately, or knowingly not?
• Does the lease require the tenant to carry renters insurance, and have you seen proof?

Turning a home into a rental changes more than the address on the policy, and renting out your home sets out the wider picture.

At Schneiderman Insurance Agency, we go through what a landlord policy reaches and where it stops, so the decision about what to carry stays yours. Learn more about our products and services by calling our agency at (818) 322-4744. You can also  request a landlord insurance 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.