More on Home Insurance
More on Home Insurance
How different dwelling insurance policies deal with damage done by tenants.
Landlord insurance, also called dwelling insurance, dwelling-fire insurance or non-owner occupied insurance, is an insurance policy that property owners buy in lieu of homeowners insurance if they plan on using their home or building as a rental property.
There are three types of landlord policies that offer different amounts and types of coverage, and individual policies and insurers have varying coverage as well.
This is long way of saying that the answer to whether landlord insurance covers tenant damage is — it depends.
There are three levels of landlord policies, just as there are three levels of homeowners insurance policies. For landlord insurance, these are are called basic dwelling property insurance or dwelling-fire form 1 (DP-1); broad dwelling property insurance or dwelling-fire form 2 (DP-2), and special dwelling landlord insurance or dwelling-fire form 3 (DP-3).
Landlord policies, whether DP-1, DP-2 or DP-3. Generally, DP-3 policies are the most comprehensive, followed by DP-2 policies, with DP-1 policies offering the least amount of coverage. But individual policies may vary in what they cover, how much reimbursement they offer, and when the coverage applies,
Landlord policies consist of five kinds of coverage, though not all policies include all types of coverage:
Dwelling coverage: Protects your property against accidents, natural disasters and thefts.
Other structures coverage: Protects detached structures like garages and sheds.
Personal liability and medical payments: Provides medical payments if a tenant or guest is hurt on your property or if a tenant brings a lawsuit against you for property damage or bodily injury. The liability portion of the landlord insurance policy may also provide a way for tenants to get reimbursed for damages to their personal property. For example, if you are found negligent in making repairs that lead to a plumbing leak, the liability portion of your insurance would both pay your legal fees and any settlement.
Loss of rental income: Also called rental reimbursement or fair rental value. Protects your rental income business from loss of rent if tenants must vacate after a covered event.
Personal property coverage: Protects your personal property that you leave on-site for the use of tenants (but not property owned by your tenants). Example of a covered loss: includes an appliance that gets fried in a fire. Additionally, you can schedule certain items on your policy to ensure reimbursement if they are destroyed.
DP-1 policies are actual cash value (ACV) policies, meaning that in the event of a loss, the insurer will reimburse you for the depreciated value of your property.
DP-2 and DP-2 policies are both replacement cost value (RCV) policies, meaning the insurer would reimburse you for the full cost of replacing your property.
DP-2 and DP-3 policies also have higher coverage amounts than DP-1 policies.
DP-1 and DP-2 landlord policies are both named peril policis, which means they only cover damage caused by perils listed in the policy. DP-1 policies cover fewer perils than DP-2 policies. In fact, some DP-1 policies only cover damage from fire, while more robust policies and DP-2 policies also cover other perils, including hail, wind, falling objects, overflowing water from damaged plumbing, and more.
DP-3 landlord insurance is an open peril policy, meaning that all causes of damage are covered except those specifically excluded in the policy.
All landlord policies generally exclude flood damage (you need separate flood insurance for that) and earthquake damage (you need to add an earthquake rider to be covered). Additional exclusions may include intentional tenant damage (see more below).
Check your policy for your specific exclusions.
If your tenant damages your rental property, your landlord insurance may cover that damage, depending on your policy and the type and extent of the damage.
There are three types of tenant damage: accidental, intentional and normal wear and tear.
Accidental damage — Sometimes covered by landlord insurance. Accidental fires are covered by all three types of landlord policies; other damage depends on the terms of your policy. When you file a accidental damage claim, you’ll still have to pay your deductible. However, if your tenants have a renters insurance policy, you may be able to get reimbursed by their liability insurance coverage, which pays for property damage the tenant caused.
Intentional damage — Sometimes covered by landlord insurance. Also called malicious damage. Examples include a tenant taking a sledgehammer to your property, stealing your fixtures, or spray-painting the walls: whether you’re covered may depend on the insurer and the terms of your policy. This can be confusing, because vandalism is covered in most policies, and intentional property damage by tenants can look a lot like vandalism, but some policies treat it differently. (That doesn’t mean you are without recourse, though; you can keep their security deposit or file a civil suit.)
Wear and tear — Not covered by landlord insurance. This includes broken fixtures and stained carpets. Again, your recourse here would be to keep a security deposit.
When it comes to rental property and insurance, there is a dividing line: the property owner’s landlord insurance property coverage covers the structure of the building and the tenant's renters insurance property coverage covers the tenant’s personal property.
Landlord insurance policies do not provide coverage for any of a tenant’s personal belongings, no matter how the property was destroyed or damaged.
However, if the tenant sues you for damage to their personal property, the liability portion of your landlord policy would pay your legal fees and any settlements. Such a suit would have to prove negligence on your part — for example, a fire was caused by bad wiring that you knew was bad and didn’t fix on purpose.
This is one reason why many landlords require tenants to have renters insurance and even write it into their tenancy agreement or lease. The coverage means they would be able to reimbursed after a loss without resorting to courts. As with landlord insurance, renters insurance (as well as homeowners insurance) may be either a named peril policy or an open peril policy.
Tenants need their own kind of insurance. If you’re a tenant, Policygenius can help get renters insurance.
Logan Sachon is the co-founder of The Billfold, a groundbreaking personal finance site for millennials that was named one of Time's 25 Best Blogs of 2012. Her work has been published in New York Magazine, Glamour, The Guardian, BuzzFeed and more.