Even with a thorough tenant screening process, there's still a chance that your tenant might not be as careful with your property as you'd like them to be. It's exactly why Provident Property Management requires tenants to carry renter's liability insurance as it protects landlords from potential damages, and you should do so as well. But what does tenant liability cover? We’ll discuss that and why it’s so important to your business.
What Does Tenant Liability Insurance Cover?
Typically, the financial protection against unintentional damage caused by tenants covers property damage caused by fires or leaks, as well as injuries they're responsible for or bills from legal or medical incidents.
There are variations in liability coverage depending on the insurance type. It can be a standalone policy or part of a broader insurance package like homeowner's insurance or a comprehensive renters insurance policy.
Personal liability coverage, which is part of renters liability insurance, can be a great prerequisite for property owners since there are damage, medical, and legal fees that landlord's insurance or standard renters insurance policies simply do not cover. Comprehensive renters liability coverage includes:
- Property Damage: It can cover unintentional damages to your property caused by the tenant such as accidental fires, water damage, and vandalism.
- Personal Injury: It covers medical bills for bodily injury to the landlord, tenants, and guests within the rental property.
- Advertising Expenses: It serves as coverage for advertising costs in the event that the tenant is evicted by the landlord.
- Legal Defense Cost: A tenant's personal liability insurance can pay for legal costs when they're sued over an incident that happened in their unit.
- Loss of Rent: Like a security deposit, the liability coverage applies to unpaid rent, which can protect the landlord from reduced rental income.
Tenant Liability Insurance vs. Renters Insurance
Both tenant liability insurance and specific renters insurance policies include liability coverage, which can protect both the tenant and the property owner. However, they prioritize different elements of the tenant experience, from safeguarding personal assets to mitigating liability exposures.
Tenant Liability Insurance
It is also referred to as renters liability insurance, but its coverage differs from standard renters insurance policies and can protect you from unexpected personal liability claims. Liability coverage mostly favors the landlord, especially since the main appeal of liability insurance for renters is to pay for property damages.
It offers peace of mind to landlords since it includes coverage for other incidents such as when a fire breaks out, a leak ruins parts of a rental unit, a guest falls and sues for medical expenses, or the tenant damages other people's property.
Although tenant liability insurance covers bodily injury or property damage, coverage limits remain. For instance, liability protection does not include medical bills for when a guest slips in the common area, or when a tenant intentionally breaks the neighbor's window.
Renters Insurance
Renters insurance policies as a whole offer protection to the tenant more than the landlord, and they also can cover personal liability. It can cover damages to a renter's personal property when the landlord is found responsible whether directly or by being negligent with maintenance and repairs.
If electronics are damaged due to an unresolved leak in the rental unit, for instance, the renters insurance policy can pay for repairs or replacements. It can also protect tenants from personal liability claims when they are sued and need assistance with legal expenses or medical payments coverage.
Furthermore, it offers additional living expenses coverage such as hotel bills, depending on the lease agreement, when the unit the tenant is renting is under repair or renovation. Just like a renter's liability policy, liability coverage for a renter's insurance is limited.
How Much Renters Liability Insurance Coverage Do Tenants Need?
A typical renters liability insurance policy comes with $100,000 worth of liability coverage. However, depending on the rental unit and the personal property within, you may require a tenant to have a larger coverage amount. The amount will depend on the insurance provider as well as the renter's insurance policy type.
Personal Liability Coverage
Personal liability insurance covers incidents that happen within the tenant's personal property such as the following examples:
- A guest slipping on your floor
- Your dog biting the neighbor
- Accidentally breaking your neighbor's belongings
Potential Costs to Cover
- Legal Fees: Forbes reports that the average hourly fee for attorneys can range between $50 to $100 per hour, which can go as high as thousands of dollars for specialized cases.
- Medical Bills: Depending on the severity of the incident, liability insurance can cover thousands of dollars aside from the doctor's visit, which alone can cost $80 to $800.
- Property Damage: For furniture damage, renters liability insurance may only cover a few dollars, but extreme cases like fires could reach millions of dollars
How Can Tenants Get Liability Insurance?
Renters liability insurance may be included with the standard renters insurance policy. Tenants can purchase higher coverage limits if they think they need more or if landlords require it. A higher coverage limit will increase the tenant's renters insurance premium.
It can already be included in the renters insurance, but tenants can choose to only opt for the renters liability insurance required by the landlord and get additional liability coverage if they think they need it.
Why Landlords Should Require Tenant Liability Insurance
It's a smart move to acquire a comprehensive landlord's insurance policy, but it's even better to also hold tenants legally responsible for damages to your personal property. When found liable, the tenant liability insurance covers repair costs or replacements.
When the tenants living in your rental property have insurance that includes tenant liability coverage, it can provide peace of mind, knowing that your personal belongings are protected. In the 2022 report, 55% of US renters have renters insurance.
Provident Property Management's High Standards Will Protect Your Rental Business
Before we rent your unit out to a prospective tenant, we make sure they have the appropriate renters policy to protect you from potential damages they might cause, and that's not the only thing we can do for you. To lighten your workload, we can do the following services:
- Property Marketing
- Tenant Screening
- Rent Collection
- Maintenance
- Financial Reporting
- Eviction Coordination
Provident Property Management can help ensure that your San Jose rental property gets the return you deserve. You can use our free ROI Calculator to see if your rental property is reaching its maximum potential.
