Landlords and tenants have a symbiotic relationship. They both need each other — one to receive an income and one to receive a place to live — and can both work toward their mutual benefit.
One important way these two parties work together is through the right insurance coverage. No matter which part of the landlord/tenant relationship you find yourself in, here's how your insurance and the others’ helps both.
Landlords generally purchase a package insurance policy known as landlord insurance when they buy or convert a rental unit. Landlord insurance coverage varies by specific policy wording, of course, but it usually includes three items. These are property damage, general liability, and lost rental income.
The benefit to landlords is obvious. Homeowners insurance won't cover a commercial enterprise, so the only way to insure the structure against disaster is a commercial property damage policy. This protects the landlord’s investment. But renters also benefit because the landlord will be able to repair the unit. They can also replace expensive but necessary items like appliances and fixtures.
If you own a personal home, you generally buy homeowners insurance to protect it. If you rent, the rough equivalent is renters (or tenant) insurance. Renters insurance has one big difference compared to homeowners insurance. It doesn't cover the structure of the home or unit itself — rather, just the belongings. This makes renters insurance an inexpensive way to ensure that renters can afford to rebuild their lives.
Renters insurance works hand in hand with landlord insurance. The landlord's policy covers repairs to the structure so that the renter has a place to live. The renters insurance covers the cost of the furnishings of the home so they can continue to live in the unit. It also protects both parties if the tenant or their guests cause injury or damage.
Personal Auto Insurance
Every vehicle owner should have personal auto insurance of some sort. Lenders or the state you live in often mandate it. Auto coverage generally comes in two varieties: comprehensive and liability only. Comprehensive coverage pays to fix or replace the vehicle if it's damaged or stolen. Liability coverage only pays for damage to other people or their property.
Does a landlord benefit when their tenants have personal auto coverage? Yes. A tenant who parks their vehicle on the landlord's property is at risk of the same disaster that could befall the rental unit — particularly from earthquakes, flooding, or extreme weather. And if a tenant's vehicle is totaled in the event, they may not have a way to continue earning an income to pay the rent.
In addition, good personal insurance protects the landlord if an incident occurs on the property. If a driver hits another tenant or guest on the landlord’s property and the driver has insufficient coverage, the injured parties may come after the property owner for damages. Similarly, a tenant who doesn't carry comprehensive coverage may need to seek compensation for theft or damage that happened on a rental property.
Commercial Auto Insurance
Landlords aren't the only ones who benefit when the other party carries auto insurance. Consider what may happen if a landlord accidentally hits a tenant’s personal vehicle when they come by to perform maintenance. If the landlord’s coverage isn't very good, the tenant may have to put in a claim on their own insurance — which often results in rising premiums and could even see their coverage cancelled.
One of the biggest misconceptions that landlords have is that their personal auto insurance covers business vehicle accidents. If an accident occurs while a landlord is picking up rent or fixing a tenant's water heater, the landlord’s personal insurance may not cover injuries to others or the replacement of the business vehicle. A commercial auto insurance policy ensures the landlord has the proper coverage.
Both the landlord and their tenants can — and often should — buy flood insurance. Flood insurance is often overlooked unless it's required by a mortgage company or local government. But floods are one of the most common exceptions to most homeowners, tenants, and landlord policies. Some policies may cover certain types of flooding — such as from a burst pipe — while denying others (such as storms).
As with coverage of personal belongings and the building itself, the best results come when both parties have flood insurance. The landlord can afford to repair the building while the renter can afford to replace their things and continue to live and earn an income.
Clearly, everyone benefits when both the landlord and their tenants carry good insurance coverage. From natural disasters to accidents, the risks to both parties are mitigated so that everyone is safer and can continue to enjoy their mutually beneficial arrangement.
No matter whether you are a landlord or a renter, take the time today to determine if you have the right coverage for your situation. The team at L.A. Insurance can help. Call to make an appointment and learn what we can do for you.