Property Investors: Risk Guide
Let’s set the scene – you’re a property investor or landlord. One of your tenants in your residential property overflowed their bathtub, causing damage not only to their apartment but also their neighbor’s personal property. Or, perhaps your tenant creates smoke damage as a result of a carpet installation gone wrong. As a property investor, the first question that likely pops into your mind is: Am I responsible for paying for this? Is my tenant? As a property investor, owner, or landlord, what should you know to mitigate risk? Luckily, we’ve created this guide to help.
Why You Should Negotiate Coverage as a Property Investor
Why should you ask tenants to name you as an additional insured? Well, considering the headache scenarios listed above, it becomes clear as to why you, as a property investor, might want to negotiate coverage with your tenants.
When a property investor, owner, or landlord allows a tenant to use their property, there is always the risk of receiving blame if an injury or damage occurs. Another hypothetical: Let’s say you’re the owner of Acme Corporation (hi, Looney Tunes!). In one of your stores, a customer slips on a loose piece of tile and tries to sue Acme Corporation, stating that as a result of your failure to maintain the premise, you’re liable for their injury.
You, however, know that these claims are not uncommon and have prepared accordingly by including an additional insured provision in your tenant’s lease. This additional provision requires your tenants to list you, Acme Corporation, as an additional insured.
Because plaintiffs assume landlords, property owners, and investors have “thick wallets,” they are often targets for such lawsuits. As a result, these individuals need to take extra care to protect themselves.
Tenant’s Legal Liability Coverage
The tenant’s legal liability (TLL) coverage can cover losses and damages. According to Insuranceopedia, tenants’ legal liability coverage is “insurance for loss or damage of a property resulting from an action of a person renting space at that property.” Tenant’s legal liability coverage, when purchased by a tenant, covers “the cost of the loss or damage caused by the tenant.” An A-rated commercial insurance carrier is typically who underwrites this type of coverage.
Why Invest in Tenant Legal Liability?
The Horton Group describes TLL as “a win-win for the owner and tenant.” But why? Tenant Legal Liability “is one policy [with] virtually no paperwork that can adequately protect all your properties in a state – inexpensively.”
Working as a master commercial insurance policy under the property owner, investor, or landlord’s name, “tenants are [also] named as additional insureds thus providing coverage for both parties.”
The icing on the cake? Tenant legal liability coverage is easy to administer, typically costing just a small monthly fee between $8 to $12 for tenants.
What Doesn’t TLL Cover?
First, it’s important to note that a tenant’s legal liability coverage is different from coverage that insures a tenant’s personal possessions, also called tenant’s content insurance content policy or renters’ insurance.
In many cases, when it comes to TLL coverage, the coverage only extends to fire, smoke, or leakage damage. Coverage, however, can be obtained on all risks but only through the use of a deductible. Tenants can obtain additional coverage to protect themselves against bodily injuries that might occur on your premises.
So, what does tenant’s legal liability coverage fail to cover? TLL does not cover damage that results from wrongful acts, intentional damage, or claims for a tenant’s personal possessions. These damages, however, could potentially be covered on a Commercial Property Insurance policy.
It’s Time to Best Mitigate Your Risk
There are a variety of different scenarios in which enforcing tenant’s legal liability coverage might prove beneficial. Whether your property is commercial or residential, vacant or filled, industrial, multifamily, and so on, mitigating risk as a property owner is of the utmost importance. And as the adage goes, better safe than sorry.
At Competitive Edge, we take time where others may gloss over details. We make sure to learn about your business as a whole because articulating who you are, as more than a series of profit and loss statements, allows carriers to confidently cover you and your business. Connect with us today to see how we can help you.