The Landlord’s Guide to Dealing with Rental Property Damage

Do you worry that renting your property might leave you vulnerable to damages and other risks? Are you seeking protection from the potential headaches of owning rental properties?

Landlord insurance can be a real lifesaver, safeguarding your real estate investment and giving you peace of mind. However, many landlords are unfamiliar with how much protection landlord insurance offers, and understanding the features of this insurance can be a complicated subject.

Fortunately, this article has the answers, allowing you to make informed decisions on this vital topic. You’ll learn all the details about what kind of protection landlord insurance provides for rental property damage and liability coverage, plus ways to reduce your property damage risk.

Common Forms of Property Damage

According to Experian's most recent data, the average home insurance claim payout is $13,955. While insurance will typically cover the cost of damages in the event of a covered loss, it’s helpful to know the types of damage that may occur so a landlord can prepare financially.

Rental property damage can range from minor cosmetic issues, such as scuffs or stains on walls or floors, to more serious situations, such as water leaks or structural problems caused by storms. Understanding and addressing these different types of damage is critical to minimizing financial loss and preventing disruption to your business and tenants' lives.

The most common types of property damage include:

• Water damage from burst pipes or water leaks.
• Fire damage caused by faulty appliances or negligence.
• Vandalism and graffiti damage.
• Structural issues due to foundation problems or natural disasters.
• Damage from animals, such as pets chewing on furniture, scratches on walls, etc.
• Theft of property, either through break-ins or tenant removal of items without permission.
• Excessive cleaning or repair costs beyond normal wear and tear.
• Slips and falls that result in injury to tenants or guests.
• Damage due to poor maintenance or lack of repairs.
• Infestations, such as rodents, cockroaches, and other vermin.
• Mold damage from inadequate ventilation or leaks.
• Smoke damage from cigarettes or other burning materials.
• Electrical damage due to faulty wiring or lightning strikes.
• Damage from negligent tenants, such as leaving hazardous materials on the premises.
• Mechanical breakdowns in appliances like refrigerators, stoves, and air conditioners.
• Snow and ice buildup resulting in water damage to roofs and walls.
• Broken windows/doors due to tenant misuse or vandalism.

When Does Landlord Insurance Cover Rental Property Damage?

Many policies cover events such as fire, theft, and certain forms of vandalism and malicious mischief not covered by standard homeowners insurance policies. Also, a landlord policy may afford liability coverage for slips and falls, legal defense costs (should a tenant sue you for negligence-related damages), and medical expenses associated with accidents.

According to Forbes, the average compensation received in premises liability cases involving property owners or landlords is $90,000. Knowing this, investing in a reliable insurance policy can help protect you from substantial financial loss should an accident occur on your property.

Another type of rental property damage coverage is loss of rent or rental loss coverage. This applies to situations where landlords cannot collect monthly rent due to damage caused by an insured incident at the property. For example, if a fire broke out in the home, rendering it uninhabitable while under repair, this coverage would help compensate the landlord for lost rental income.

Some landlords may also choose to include building ordinance or law coverage in their policy. This coverage helps pay for rebuilding or repairing a building damaged from an insured event to meet local safety regulations, such as current fire codes and electrical wiring standards. These regulations may have changed since the home’s original construction.

Most policies come with exclusions and limitations, so you should also be aware of these. Some standard exclusions apply to normal wear and tear, mold and mildew damage, maintenance-related issues, intentional acts by tenants or guests, floods, earthquakes, and terrorism.

Knowing what is and isn’t included in your policy can help you plan for the unexpected and understand when it's necessary to purchase additional insurance coverage.

Who Pays for Damage to a Rental Property? (Tenants vs. Landlords)

A landlord insurance policy can cover any unintentional damage done to the property beyond normal wear and tear. However, it’s not always clear who should pay for such damages. Is it the tenant or the landlord?

The answer depends on the cause of the damage since both landlords and tenants have rights and responsibilities.

As the landlord, your responsibility is to ensure that your rental property is safe and in good condition when tenants move in. On the other hand, tenants must take care of the property as if it were their own and are responsible for reporting all damages promptly.

Tenant Responsibilities

Tenants are liable for any intentional or accidental damage they cause during their tenancy. This includes fire, water damage, or any other destruction to the property caused by negligence or abuse.

For example, suppose a tenant damages the property intentionally by punching walls or breaking windows. These actions could be considered criminal activity and may be punishable by law. In this case, the tenant may be held liable for damages.

Tenants should check in with their landlord at least once a year to report any maintenance needs or damage that has occurred.

If tenants fail to do this, they may be held responsible for covering the cost of repairs should they be necessary after the lease has ended. Landlords may also be able to deduct the cost from their tenant's security deposit to pay for repairs if allowed under local landlord-tenant laws.

Landlord Responsibilities

Landlords are responsible for providing a rental property that is in good condition and maintaining and repairing any damage caused by age-related wear and tear. For instance, the landlord must pay for repairs or replacements if a roof starts leaking due to deferred maintenance or poor construction.

Landlords are also responsible for damage resulting from building or safety code violations, such as wiring problems, plumbing issues, and air conditioning failures. Examples of common types of damage which may be the responsibility of the landlord include:

• Leaks or flooding due to faulty plumbing or aged pipes.
• Electrical issues such as broken light fittings or tripped fuses.
• Structural damage resulting from long-term dampness or subsidence.
• Cracks in walls and floors as a result of shifting foundations.
• Heating and cooling system failures.
• Windows and doors that need to be replaced or repaired due to age or general wear and tear.
• Broken locks, handles, and other hardware that require replacement.
• Damage from pests such as rats and insects which need treatment.

In these instances, landlords must fix the issue quickly or risk being at fault for any further damages incurred.

10 Tips for Reducing Damage to Your Rental Property

Taking necessary precautions to protect your rental property from damage is essential. From installing quality locks and security systems to properly maintaining the exterior of the building, there are plenty of ways landlords can reduce the risk of damage to their property.

Here are 10 tips for landlords looking to keep their investment safe.

1. Inspect your property regularly. Check lights, smoke detectors, appliances, pipes and drains, and windows and doors for any signs of wear or damage.

2. Maintain outdoor areas. Trim bushes away from walkways or entryways so potential intruders don't have anywhere to hide. Keep an eye out for overgrown trees that might interfere with power lines or other utility services.

3. Secure windows and doors. Ensure all locks on windows and doors are in good working condition, and consider installing double-keyed deadbolts for extra security.

4. Install a security system. This system could be a simple alarm that goes off when a door opens to more advanced options with motion detectors, cameras, and other surveillance measures.

5. Check references of potential tenants. When screening new tenants, perform a thorough background check before signing the lease agreement, including credit history, criminal record, rental history, employment, and income verification. While this may seem obvious, it can be surprising how many landlords don’t conduct a comprehensive tenant screening process.

6. Educate tenants on safety measures. Provide tenants with a checklist of safety tips and precautions they should take while living in the rental property. This list might include keeping doors locked at all times and notifying you immediately if they see any signs of damage or wear.

7. Offer tenant incentives for taking care of the property. Some landlords may offer reduced rent to tenants who keep their rental clean and tidy or other bonuses for maintaining the building’s exterior.

8. Set clear guidelines in the lease agreement. Be sure your tenants understand what is expected of them when taking care of the property by including detailed descriptions in the lease agreement.

9. Take preventive action. If you notice any signs of potential damage to the property, such as a leaking roof or broken windows, take care of it right away before it gets worse and becomes more expensive to repair.

10. Adequately insure your property. Talk to your insurance agent about any additional protection you may need for your property, such as flood insurance or liability coverage.

Want to See How Your Current Rental Property Insurance Stacks Up?

A landlord insurance policy is essential for protecting yourself against unexpected costs related to rental property damage. Be sure to research different policies so that you’re able to choose the best insurance option for your needs.

Obie can help you choose the right coverage for your property and provide you with competitive rates that fit your budget. Plus, Obie’s customer service team is always available to answer any questions about the policy or process.

Start protecting your rental property today with a free landlord insurance quote from Obie.