Whether your rental is your former primary residence or an investment property, having the proper insurance is key to being adequately protected as a landlord. Your insurance agent can review the type of policy and coverage you may need, so make sure that you understand what a policy will cover. This is important in order to retain as much insurance protection as possible for your rental property. It goes without saying that the tenant has the legal right to terminate the rental agreement if the premises is damaged or destroyed in any way other than by the wrongful or negligent acts of the tenant, but there are many ways that limits of an insurance policy will play into your landlording decisions.

Landlord's vs. tenant's insurance

Lease agreements should state that the landlord’s insurance does not cover tenant’s personal possessions in the event of loss or damage due to fire, windstorm, flood, theft, vandalism, or other similar cause. The tenant should be advised to obtain renter’s insurance to protect their investment in their personal property. Furthermore, the lease should state that the tenant is liable for any personal injury or property damage caused by the negligence or willful acts of tenant, and that the landlord is liable for any personal injury or property damage caused by the negligence or willful acts of the landlord.

The landlord may require the tenant to obtain and maintain renter’s liability insurance. Upon 30 days’ written notice from the landlord, the tenant shall obtain renter’s liability insurance with an amount of coverage that does not exceed $100,000 per occurrence. The landlord may require proof of insurance only if the landlord provides the tenant with proof of the landlord’s comparable liability insurance. The landlord may not require that the tenant name the landlord as an additional insured. The tenant is exempt from the insurance requirement of this paragraph if his or her household income is equal to or less than 50% of area median income, adjusted for family size as measured up to a five-person family, as determined by the State Housing Council based on information from the United States Department of Housing and Urban Development. Finally, the landlord may not require the tenant to obtain or maintain renter’s liability insurance if the premises has been subsidized with public funds.

Best practices

To make sure you are covering all of your bases with insurance and your property, make sure to document (preferably with photos including a date stamp) the physical property inside your rental. This serves two purposes - evidence of property condition and existence of specific items for insurance purposes. Finally, always consult with your insurance agent about your rental property prior to signing on with your first tenant. Your insurance agent can advise you on the appropriate coverage to keep the value of your asset protected.