Insurance and Real Estate : Tenants’ Policies Also Protect the Landlords

Commercial landlords usually require their tenants to carry adequate liability insurance. This protects them from financial loss resulting from third-party claims against acts of tenants or damage tenants cause to the premises (e.g. fire or vandalism).

Tenants’ liability coverage also protects the owner’s insurance companies from having to pay for losses caused by tenants and reduces the owner’s risk of insurance cancellation or premium increase due to excessive claims.

Residential leases do not usually require tenants to maintain liability insurance. This is a serious oversight, because owners of residential buildings are at just as much risk of liability losses as owners of commercial buildings.

In a recent case, a tenant’s dog allegedly bit someone while the tenant was walking it several blocks from his apartment. The tenant did not have tenant homeowner’s insurance, which would have provided liability protection.

The injured party sued the building owner as well as the tenant because the owner and his liability insurance represented the only realistic means of recovering damages. The case was settled out of court, but as a result of the claim being filed, the owner had an increased risk that his insurance premium might be raised or the policy canceled.

Protect yourself and your assets. Require residential tenants to purchase and maintain adequate liability insurance. And, make sure you are named as an additional insured with notice of cancellation so that if your tenants let their policies lapse, you will be given advance notice.