More than 44 million American households rent their homes. The rental market helps connect families to homes but has some real risks. Landlords need to know how best to protect their investments.
When a tenant damages a property, new landlords may not know where to turn to. Will the renters' insurance policy cover it? Does landlord insurance cover tenant damage?
If the property has already taken serious damage, you don't want to spend time figuring out how to handle it. Keep reading for more information on dwelling coverage under typical insurance policies.
Does Landlord Insurance Cover Tenant Damage?
Coverage depends on the type of tenant damage as well as the scale. Some renters insurance policy programs will cover a lot of different types of tenant damage. Others will only cover catastrophic cases.
Wear and Tear
No landlord insurance policy will cover general wear and tear-things like rusty pipes or worn-out carpet fall under a landlord's purview in all cases.
Regular maintenance and property inspection can reduce the risk of expensive fixes. A rusty pipe or pinhole leak in the roof will cost less than a ceiling collapsing.
Not all policies cover all types of accidental damage. Your eligibility will vary depending on whether you have a DP-1, DP-2, or DP-3 policy.
DP-1 policies cover extreme damage from situations like kitchen or electrical fires. DP-3 policies offer comprehensive accidental damage insurance. A DP-2 policy will land somewhere between these two extremes.
Intentional damage can get strange under landlord insurance. Most policies do not cover intentional damage caused by the renter. You'll need to handle that with your tenant.
If your tenant drills a hole in the wall to install a shelving unit, this will not fall under landlord insurance.
It can't hurt to submit a claim for egregious harm to the property, though. If the renter has started breaking down walls due to an oncoming eviction or repeated out-of-control partying, consider filing a claim for vandalism. Not all dwelling coverage policies will accept such a claim if the tenant vandalizes the property, so read your insurance policy closely.
If your renter moves out due to covered peril, you may receive reimbursement for lost rent up to the fair rental value as well as the peril itself. Different types of landlord insurance have different definitions of covered peril. As with accidental damage, DP-1, DP-2, and DP-3 policies offer increasing coverage.
Some DP-1 policies, for instance, only consider fires to be a covered peril. A DP-3 policy, meanwhile, often covers all perils not outlined as exceptions. Insurance companies use the term "open-peril policy" to describe the latter.
Now that you've read this article, you should be more confident in your answers to the question, "Does landlord insurance cover tenant damage?" Damage caused by tenants can get a little thorny in the insurance world, but you'll be able to respond to it better now that you know your rights.
If you're struggling with getting started in real estate management in El Paso, Texas, give us a call. We provide property management and brokerage services for both residential and commercial property owners.