Tenant Legal Liability, Why Would I Care?

When it comes to insurance or additional expenses put onto your tenants, you’re probably thinking: “Why would I ever consider a tenant legal liability policy? I spend enough on insurance. Plus, the market is tough enough, they’ll just go next door.”

Tenant legal liability is one policy, virtually no paperwork that can adequately protect all your properties in a state – inexpensively. This policy is designed for the owner and operator of a building or complex with 1,500+ units, covering the landlord from tenant related damage(s).  It’s a win-win for the owner and tenant.

How Does Tenant Legal Liability Work?

A tenant liability policy is not a renter’s policy. Instead, it’s a Master Commercial Insurance Policy under the owner/landlords name.  The tenants are named as additional insureds thus providing coverage for both parties.

The policy is rather easy to administer; there is a per door monthly fee to tenants that typically ranges between $8-12.

What Does Tenant Legal Liability Cover?

It covers a variety of common issues for landlords.  

• Have you ever had a tenant accidentally flood their unit?
• Has a tenant ever left a candle lit that causes a fire or smoke damage?
• Do you allow for pets in your units?  These companions are often the crux of many issues.

The master policy covers assets which include a value of $100,000 in liability coverage for specific property damage to any unit or common area of a specified insured location – which your tenant is “liable” for.

The list of covered perils includes the following:

• Fire
• Falling Objects
• Water
• Accident discharge or overflow of water
• Accidental water back-up from a sewer, drain or sump
• Loss of Rental Income
• Collapse
• Smoke
• Explosion
• Freezing Pipes
• Appliance Overflow
• Pet Damage*Pet damage is the only deductible at just $250

Then, the question of coverage for losses and relocation comes into play. Losses and relocation are a separate coverage paid outside of the normal insurance program.

Tenant Benefits

For tenants, the benefits far outweigh the cost:

• The policy is often cheaper than renter’s insurance
• The policy provides more coverage than a renter’s policy
• In the case of a large claim, a renter’s policy could likely have insufficient liability coverage whereas the tenant liability policy will offer more coverage such as relocation due to a loss

When the claim is greater than the insurance policy limits, the landlord’s property policy is on the hook to pay – leading to increased premiums.

The bottom line, the program has the insurance controlled by you, the owner – which includes broadened coverage, online enrollment tracking/management, and possible profit sharing. By profit sharing, we mean a program that is designed to create a profit through a captive insurance company – this is completely legal and can actually be of significant dollar value to the owner.

“I haven’t had a claim in years; I’m fine.”

It’s simply not a matter of “if” but rather “when” claims will occur. In fact, it is very likely that you are going to run into the issue of an underinsured loss.

• What happens if you do have a loss?
• Will you be in a position to recover?

Our challenge to any landlord, property manager or owner who is looking to achieve a higher level of performance is to reflect on the possibilities when implementing a tenant legal liability program for their sake, in addition to their tenants.