Does Landlord Insurance Cover Tenant Damages?
Sometimes, yes. Traditional landlord insurance policies will help cover many types of tenant damage. You’ll still need to pay a deductible, however. And if the damages are minor, you may wish to pay for them out-of-pocket rather than create a claims history.
Rental property insurance can be complicated. This unbiased guide written by licensed insurance professionals will cover everything you need to know about landlord insurance policies and explain instances when landlord insurance covers tenant damage. We’ll discuss:
- Landlord insurance coverage basics
- Does a landlord policy cover tenant damage?
- Accidental fires caused by a tenant
- Tenant damages that aren’t covered by insurance
- Intentional tenant damage
- “Wear and tear” are not covered by landlord insurance
- Does landlord insurance cover tenant damage beyond normal wear and tear?
- What about squatters?
Traditional Landlord Insurance Coverage Basics
Like a homeowner’s insurance (HO) policy, landlord insurance policies protect the dwelling and other structures against perils like fire, lightning, wind, fallen trees, and so on.
Liability coverage is also included in most landlord insurance policies, and this helps protect the property owner in case of a lawsuit if someone were to get injured on the property and sue the landlord for negligence.
Read your policy closely, and you’ll learn that the property is also protected against:
- Riot and civil mischief
- Vandalism and malicious mischief
Notably absent from most landlord policies are:
- Flood coverage
- Earthquake coverage
- Nuclear war coverage
- And hurricanes might also be specifically excluded at coastal properties
That’s because these huge, regional catastrophes can cause enough damage to make an insurance company go insolvent — a fancy word for “broke” — leaving their customers uninsured.
The biggest difference between a landlord protection policy and a HO policy is the lack of contents coverage. Landlords don’t have a financial interest in the contents of a rental property. Those belongings are the tenant’s responsibility, and can be covered by a renter’s policy.
Does a Landlord Policy Cover Tenant Damage?
Many accidental damages that your tenant might cause are covered by your landlord policy. Let’s explore a common scenario.
The Story of Your Tenant Janet: Accidental Fire Damage is Covered by Landlord Insurance
Landlord protection policies always include accidental fire coverage. Imagine your tenant, we’ll call her Janet, accidentally starts a kitchen fire when she forgets to turn the stove off after dinner.
The fire escalates rapidly. And even though the fire department arrives quickly and saves the rest of the home, the kitchen is entirely burnt. Luckily, Janet got out safely without any injuries.
Between the cabinetry, walls, appliances and flooring, the insurance claims adjuster says you’re looking at about $20,000 in damages. There is also hazardous debris that needs to be removed, and a strong smoky odor throughout the home.
Your landlord policy will pay to repair all these issues, even the smoke damage and debris removal, once you pay your deductible. Furthermore, if your neighbors complain of smoke damage to their home or belongings, that’s also covered by the liability portion of your policy.
Some landlord policies cover temporary housing for your tenant while the home is repaired. And you might have lost income coverage, which replaces the rental income you’re used to receiving. This is important, because repairs might take several months.
Tenant Belongings Are Not Usually Covered by a Landlord Policy
As repairs are underway, 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 appliances, and $300 in groceries. The total of her loss is $2,000.
Hopefully, Janet has renter’s insurance. If so, she can get reimbursed quickly for those damages. Otherwise, she can try to sue you in small claims court, and she might win. Even if she doesn’t win, court will still be a huge hassle. That’s one reason why modern landlords and property management companies require tenants to carry rental insurance as part of their lease agreement.
The Story of James: Your Landlord Policy Covers Damages to Other Structures
Now let’s imagine another tenant, James. He rents one side of a duplex and has access to half of a two-car garage. James is puttering around in the garage one day, listening to a ball game on the radio. James steps away for just a moment and accidentally leaves a hot soldering iron too close to his propane tank and KABOOM! There is an explosion in the garage.
Thankfully, no one is hurt. Fire trucks arrive quickly and put out the fire. Your claims adjuster says you’re looking at about $8,000 in damage to the garage. It’s covered, less a deductible, of course.
Again, James might attempt to sue you for the loss of his damaged tools. There is a slim chance he’ll win, as the explosion was his fault. But he could try, and court is always a hassle.
If a third-party tries to collect from you — perhaps the destroyed lawnmower in the garage belonged to James’ father — the liability portion of your landlord insurance policy will come into play.
The Story of Little Johnny: Most Landlord Policies Cover Accidental Water Damage
Renting the other side of the duplex is Christina and her four-year-old son, Johnny. One morning, the little darling gets up extra early and flushes his GI Joe dolls down the toilet. No one realizes until it’s too late that plumbing is plugged up. When Christina gets home from work, she calls you panicking that there’s water damage throughout the whole apartment, and it’s seeped into the basement causing water damage to the other side.
First, check to see if your landlord insurance policy includes water damage. If you have this coverage, it will pay for repairs to your walls, floors, plumbing and so on.
If any of Christina’s belongings are damaged, she’ll need to look to her renter’s insurance company for a check.
Now that we’ve addressed the common types of tenant damages covered by your landlord insurance, let’s explore some tenant damages that aren’t covered by your landlord insurance.
Tenant Damages That Aren’t Covered by Landlord Insurance
Intentional damages and wear and tear are not covered by traditional landlord insurance policies. There is a new type of insurance rider — an add-on to an existing policy, also called an endorsement — offered by a few property insurers to help mitigate the costs of intentional tenant damage. Different insurers use different names, but it might be called:
- Tenant damage insurance
- Tenant protector plan
- Or intentional tenant damage coverage
This is a relatively new and unusual type of coverage, but as a landlord you should ask your insurer about adding it to all your rental property policies.
Intentional Damages Caused by Tenants
Landlord policies exclude intentional damage caused by your renters. Read your policy carefully. The language might vary a little, but it will say something like:
“Intentional damage caused by tenants, including, but not limited to malicious destruction before, during or within 10 days of eviction or vacancy is excluded.”
Your next question is, “What qualifies as intentional damage by a tenant?” Well, any purposeful, malicious vandalism or destruction of the rental property done by a paying tenant — or one that’s being evicted for non-payment — qualifies as intentional damage.
- Graffiti or “tagging” in units or residential community hallways, stairwells, and parking garages
- Removal of faucets, plumbing or copper wiring
- Purposefully broken windows or glass
- Arson, a fire lit specifically to cause property damage
- Broken tiles and toilets
As a property owner, you’ll be able to tell right away if the damage was intentional. One cracked window is probably not done on purpose. But an entire bathroom that’s been beaten to bits with a sledgehammer is easy to identify.
Normal Wear and Tear is Not Covered by Landlord Insurance
Even the most respectful, clean, and well-behaved tenant will cause wear and tear in your rental unit. There is no insurance product you can buy to cover it, and it’s not supposed to be covered by a deposit either. (This is a common mistake made by many new landlords, but a tenant can sue and win easily for this.)
Every state has slightly different definitions of wear and tear, but it’s considered a cost of doing business as a property owner. Examples of normal wear and tear include:
- Worn out flooring
- Stained carpeting that needs professional cleaning
- Minor scratches, dings, and chips on walls
- The occasional new toilet, faucet, or showerhead
- Appliances that need to be repaired or replaced
- Worn-out furniture in furnished units
Unfortunately, landlord insurance does not cover these types of tenant damages, even though they might be significant. They are a cost of doing business.
Between tenants, landlords have the responsibility to clean and repair rental units to the point they’re habitable by local ordinance (laws.) Every state has slightly different requirements, but it usually means working heat, plumbing, locks on windows and doors, and a refrigerator. A functioning cooling unit is now considered a point of habitability in hotter states.
Does Landlord Insurance Cover Tenant Damage Beyond Normal Wear and Tear?
No. There is no landlord insurance product or rider that covers tenant damages done beyond the normal wear and tear expected. Those repair costs will be up to the property owner, but you can use their security deposit for damage beyond normal wear and tear.
For example, when a tenant moves out, you might find they had a rottweiler living in the home secretly. Pets are strictly forbidden on their lease.
The dog did a ton of damage, chewed the wooden door frames, destroyed the screen doors, and scratched the floors and walls. You’ll need to repair or replace these, and the cost of doing so will come out of the tenant’s deposit.
Examples of tenant damage beyond normal wear and tear could include:
- Damage done by pets if pets are not allowed in the lease
- Cabinet or closet doors that are completely missing or destroyed
- Carpet that has been pulled up, burnt or cut
Pro tip: Document the condition of the house 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 vagrant individuals who move into your vacant property while it’s uninhabited, but they can also be guests of your tenants who refuse to leave even once your tenant leaves the property.
Insurance companies don’t like to insure vacant properties, because squatters cause a lot of damage. That’s why most traditional landlord policies exclude units that are vacant for 60 days or more.
Still, some damages caused by squatters might be covered by your landlord policy.
Accidental Damages Caused by Squatters Are Usually Covered by Insurance Until 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 whole structure down, this would probably be covered by your policy.
Before that crucial 60 day mark, most malicious vandalism would also be covered. So, if a squatter were to break all the windows and glass in a rental home, you’ll be able to get that replaced and only pay a deductible.
However, as of day 61, the insurance company will fight against paying any sort of claims related to squatter damages.
Landlord Policies are Evolving Since the Pandemic
When COVID-19 struck, many landlords were put in an awkward situation. Eviction moratoria meant that tenants couldn’t be evicted, and in some states, the legislation lasted into 2022.
Since then, landlords have struggled to evict tenants, some who haven’t paid rent for two years. The good news is that these properties aren’t vacant, since they’ve been inhabited the entire time. So, they’re still insured by your landlord protector policy.
The bad news is that evicting these tenants can be an expensive and time-consuming legal process, depending on your state and county laws.
Regardless, some landlord insurance policies are changing since the pandemic in regard to squatters rights and tenant coverage. So be sure to ask your favorite insurance agent about changes to your landlord protector policy when it’s time to renew.