Landlord Liability: Insurance FAQ

How insurance can help protect a rental property business.

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How can insurance help protect a rental property business?

What does renter's insurance cover?

A well-designed insurance policy can protect a landlord's rental property from losses caused by many perils, including fire, storms, burglary and vandalism. (Earthquake and flood insurance are typically separate.) A comprehensive policy will also include liability insurance, covering injuries or losses suffered by others as the result of defective conditions on the property. Equally important, liability insurance covers the cost (mostly lawyer's bills) of defending personal injury lawsuits.

Here are some tips on choosing insurance:

• Purchase enough coverage to protect the value of the property and assets.
• Be sure the policy covers not only physical injury but also libel, slander, discrimination, unlawful and retaliatory eviction and invasion of privacy suffered by tenants and guests.
• Carry liability insurance on all vehicles used for business purposes, including the manager's car or truck if he or she will use it on the job.

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While tenants may not have as much at stake financially as property owners, they also need insurance -- especially tenants with expensive personal belongings. Tenant losses from fire or theft are not covered by the landlord's insurance.

The average renter's policy covers tenants against losses to their belongings occurring as a result of fire and theft, up to the amount stated on the face of the policy, such as $25,000 or $50,000.

Most renter policies include deductible amounts of $250 or $500. This means that if a tenant's apartment is burglarized, the insurance company will pay only for the amount of the loss over and above the deductible amount.

In addition to fire and theft, most renter's policies include personal liability coverage ($100,000 is a typical amount) for injuries or damage caused by the tenant -- for example, if a tenant's garden hose floods the neighbor's cactus garden, or a tenant's guest is injured on the rental property due to the tenant's negligence.

Renter's insurance is a package of several types of insurance designed to cover tenants for more than one risk. Each insurance company's package will be slightly different -- types of coverage offered, exclusions, the dollar amounts specified and the deductible will vary. Tenants who live in a flood or earthquake-prone area will need to pay extra for coverage. Policies covering flood and earthquake damage can be hard to find; tenants should shop around until they find the type of coverage that they need.

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