Does landlord insurance cover renter damages?

Sometimes yes. Traditional landlord insurance policies will help cover many types of damages to the tenant. However, you will still need to pay a deductible. And if the damages are minor, you may want to pay it out of pocket instead of creating a claims history.

Real estate insurance can be complicated. Written by licensed insurance professionals, this unbiased guide will cover everything you need to know about landlord insurance policies and explain when insurance covers renter damages. We will discuss:

Basics of Traditional Owner Insurance

Like a homeowner’s (HO) insurance policy, homeowner’s insurance policies protect the dwelling and other facilities from risks such as fire, lightning, wind, fallen trees, etc.

Liability coverage is also included in most landlord insurance policies, and this helps protect the landlord in the event of a lawsuit being filed if someone sustains an injury on the property and the landlord is sued for negligence.

Read your document closely, and you will know that the property is also protected from:

What is noticeably absent from most landlord policies are:

• flood coverage
• earthquake coverage
• nuclear war coverage
• Hurricanes may also be excluded specifically in coastal properties

That’s because these massive regional catastrophes can cause enough damage to bankrupt an insurance company – a fancy word meaning “bankrupt” – leaving their customers without insurance.

The biggest difference between the owner protection policy and the HO policy is that there is no coverage of the contents. Landlords have no financial interest in the contents of the rental property. This property is the tenant’s responsibility, and may be covered by the tenant’s policy.

Does the landlord’s policy cover tenant damage?

Many incidental damages your tenant may cause are covered by your landlord’s policy. Let’s explore a common scenario.

Your Janet tenant’s story: Accidental fire damage is covered by landlord insurance

Owner protection policies always include accidental fire coverage. Imagine your tenant, we’ll call her Janet, accidentally sets the kitchen on fire when you forget to turn off the stove after dinner.

The fire escalated rapidly. And although the fire department quickly arrived and saved the rest of the house, the kitchen was completely burnt out. Fortunately, Janet escaped safely without any injuries.

Between cupboards, walls, appliances, and floors, the insurance claims official says you’re looking for damages of about $20,000. There is also dangerous debris to remove and a strong smell of smoke throughout the house.

The owner’s policy will pay to fix all of these issues, even smoke damage and debris removal, once the deductible is paid. Furthermore, if your neighbors complain about smoke damage to their homes or property, it will also be covered by the liability portion of your policy.

Some landlord policies cover your tenant’s temporary housing while the home is being repaired. And you may have lost income coverage, which replaces the rental income you used to get. This is important, because repairs can take several months.

Tenant’s property is not usually covered by the landlord’s policy

While repairs are being made, Janet asks you for compensation for her lost belongings that were damaged during the kitchen fire. These include a personal laptop computer, dishes, small kitchen gadgets, and $300 worth of groceries. Her total loss is $2000.

Hopefully, Janet has renter insurance. If so, she can get prompt compensation for these damages. Otherwise, she can try to sue you in small claims court, and you may win. Even if you don’t win, the court will still be a big problem. This is one of the reasons why landlords and modern property management companies require tenants to carry rent insurance as part of their rental agreement.

James’ story: Owner policy covers damage to other structures

Now let’s imagine another tenant, James. It rents one side of the duplex and has access to a two car semi garage. James was walking around the garage one day, listening to a ball game on the radio. James turns away for a moment and accidentally leaves a hot soldering iron too close to the propane tank and KABOOM! There is an explosion in the garage.

Fortunately, no one gets hurt. Fire trucks arrive quickly and put out the flames. Your claims officer says you’re looking at about $8,000 in garage damage. It’s covered, not deductible of course.

Again, James may try to sue you for losing his damaged tools. There is little chance of winning, because the blast was his fault. But he can try, and the court is always a problem.

If a third party tries to pick it up from you—perhaps the destroyed lawnmower in the garage belonged to James’ father—the liability portion of your landlord’s insurance policy will be triggered.

Little Johnny’s story: Most landlord policies cover accidental water damage

Christina rents the other side of the duplex and her four-year-old son, Johnny. One morning, the little sweetheart gets up early and flushes the GI Joe dolls down the toilet. No one realizes until it’s too late that plumbing has been plugged in. When Christina comes home from work, she panicked that there was water damage throughout the entire apartment, and it leaked downstairs causing water damage on the other side.

First, check to see if the landlord’s insurance policy includes water damage. If you have this coverage, you will pay for repairs to walls, floors, plumbing, etc.

If any of Christina’s belongings are damaged, you’ll need to check with the renter’s insurance company for a check.

Now that we’ve addressed the common types of renter damage covered by landlord’s insurance, let’s explore some of the tenant damage that isn’t covered by landlord insurance.

Tenant damages not covered by landlord insurance

Intentional damage and wear and tear are not covered by traditional landlord insurance policies. A new type of insurance rider—in addition to an existing policy, also called an endorsement—is offered by a few property insurers to help mitigate the costs of intentional harm to a tenant. Different insurance companies use different names, but they can be called:

• Tenant damage insurance
• Tenant Protection Plan
• or cover for intentional renter damage

This is a relatively new and unusual type of coverage, but as a landlord, you should ask your insurance company to add it to all of your rental property policies.

Intentional damages caused by tenants

Landlord policies exclude intentional harm caused by tenants. Read your policy carefully. The language may be slightly different, but it will say something like:

“Deliberate damage caused by tenants, including, but not limited to, intentional destruction before, during, or within 10 days of an eviction or vacancy is excluded.”

Your next question is, “What counts as intentional harm by the tenant?” Well, any willful or malicious vandalism or destruction of rental property by a paying tenant – or evict for non-payment – is considered intentional damage.

Examples are:

• Graffiti or “marking” in units or residential community corridors, stairways, and parking spaces
• Remove faucets, plumbing, or copper wires
• Intentionally broken windows or glass
• arsonA fire specially lit to cause property damage
• Broken tiles and toilets

As a property owner, you will immediately be able to tell if the damage was intentional. The cracked window may not have been done on purpose. But it is easy to recognize an entire bath that has been hit with a sledgehammer.

Normal wear and tear is not covered by the owner’s insurance

Even the most respectful, clean, and well-behaved tenant will wear out your rental unit. There is no insurance product that you can buy to cover it, and it’s not supposed to be covered by a deposit either. (This is a common mistake many new landlords make, but a tenant can sue and easily win for it.)

Each state has slightly different definitions of wear and tear, but they consider the cost of doing business as a property owner. Examples of normal wear include:

• worn out floors
• Colorful carpets that need a professional cleaning
• Minor scratches, dings and chips on the walls
• Toilet, faucet or occasional new shower head
• Appliances that need repair or replacement
• Dirty furniture in the furnished units

Unfortunately, landlord insurance does not cover these types of renter damage, even though they can be significant. It is the cost of doing business.

Among tenants, landlords are responsible for cleaning and repairing rental units to the point where they are habitable under local law(s). Each state has slightly different requirements, but they usually mean working heat, plumbing, window and door locks, and a refrigerator. A working refrigeration unit is now considered a habitable point in the hottest situations.

Does landlord insurance cover renter damage beyond normal wear and tear?

No, there is no product or passenger landlord insurance that covers renter damages in excess of expected normal depreciation. These repair costs will be up to the landlord, but you can use their security deposit for damage behind normal wear and tear.

For example, when a tenant moves in, you may find that they had a dog that lived in the house secretly. Pets are strictly prohibited in the rental agreement.

The dog did a lot of damage, chewing on wooden door frames, ruining screen doors, and scratching floors and walls. It will need to be repaired or replaced, and the cost of doing so will come out of the renter’s deposit.

Examples of tenant damages other than normal wear and tear can include:

• Damage caused by pets if pets are not allowed in the lease
• Completely missing or damaged closet or cabinet doors
• Cut, burnt, or slashed carpet

Pro tip: Document the condition of the home with the tenant when they move in and again when they move out.

What about squatters?

Every rental property owner will eventually deal with squatters. These can be homeless individuals moving into your vacant property while it is uninhabited, but they can also be guests of tenants who refuse to leave even once the tenant has left the property.

Insurance companies do not like to insure vacant properties, because squatters do a lot of damage. This is why most traditional landlord policies exclude units that are vacant for 60 days or more.

However, some damages caused by squatters may be covered by your landlord’s policy.

Accidental damages caused by squatters are usually covered by insurance up to the 60 day mark

If your unit has been uninhabited for less than 60 days, and a squatter accidentally causes a fire that burns the entire structure, this will likely be covered by your policy.

Before the crucial 60-day mark, most malicious vandalism will also be covered. So, if a loafer breaks all the windows and glass in a rental home, you’ll be able to replace that and only pay a deductible.

However, from day 61, the insurance company will struggle against paying any kind of random payout claims.

Owners’ policies have been evolving since the outbreak of the epidemic

When COVID-19 Many owners were put in an awkward position. The eviction suspension meant that tenants could not be evicted, and in some states, the legislation lasted until 2022.

Since then, landlords have struggled to evict tenants, some of whom have not paid rent for two years. The good news is that these properties are not vacant, as they have been inhabited all along. Therefore, they are still insured under the owner protection policy.

The bad news is that evacuating these tenants can be an expensive and time-consuming legal process, depending on your state and county laws.

Regardless, some landlord’s insurance policies have been changing since the pandemic regarding squatters’ rights and renter coverage. So be sure to ask your preferred insurance agent about changes to the owner protection policy when it’s time to renew.