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Owners, Landlords and Tenants Liability Insurance
Whether you are a landlord or a tenant, it is important to have insurance of the liability which can arise from the ownership, operation, or maintenance of premises. Property owners may be liable to the tenants and guests for injuries if they fail to keep their premises safe for them. Injuries can be caused by some defective conditions of the rental property, environmental hazards or criminal activity.
If you are an owner of the property that you rent or lease out to tenants, you need insurance on your property which will protect you from risk of having to rebuild your premises and paying excessive costs in case something goes wrong. The common causes of damage to buildings are fire, smoke, hail, airline or automobile impact. Landlord Liability Insurance can protect property owners against these hazards.
Landlords Insurance can be referred to a wide range of coverage from Landlords Buildings to Landlords Contents and Property Owners Liability. Since the risks associated with let properties differ from the risks associated with owner occupied properties, it is necessary to consult with an insurer who specializes in this type of Property Insurance.
The fact is that a Standard, Buildings or Contents Insurance policy on a property will not provide coverage for the property or contents when you start letting it. You will need a Building Insurance policy for landlords properties (buy to let building insurance). It covers against fire, flood, lightning and subsidence and may offer Property Owners Liability as an additional coverage. The landlord should have the building insured for major perils since they have their own financial interest in the property.
If you let a property, it is important to help protect yourself against claims arising from any injury the tenant may suffer on your let property. For instance, if your tenant injured themselves having fallen down the stairs in your let building, he/she may hold you liable as the owner of the property. Without a proper insurance this will lead to costly legal claims and could result in great losses and even bankruptcy.
However, this type of policy is not offered to commercial buildings. One will need a Commercial Property Insurance policy to cover a commercial property. Also, tenants should note that Landlord Liability Insurance will cover only the fixtures in the rooms, the staircase, the elevator, and similar things the owner actually owns and to protect the tenant's possessions inside their apartment, they should purchase Renter's Insurance. Landlord Contents Insurance offers coverage only for landlords' contents in the property but not for the tenants' contents. Note that most policies normally exclude any coverage for valuable items and contents owned by the tenant.
Your property must be adequately insured. The sum insured should represent not the building's market value but the full re-building cost of your property. In many cases the re-building value of property can be considerably higher or lower than its market value. Buildings Insurance is a policy which will compensate the costs of re-building or repairing your property in case it is damaged or destroyed. Buildings Insurance policies are often index-linked, which means that to match the Retail Price Index (RPI) they raise automatically on a yearly basis.
The Buildings Insurance policy usually includes the following perils and dangers:
Severe Weather: Storms, Lightening, Floods
Impact from Vehicles, Falling Trees, Aircraft
Burst pipes or leakage of oil or water
Theft and Vandalism
Malicious damage caused by the tenants
Check if your mortgage company includes a special deal on Buildings Insurance in your mortgage. Make sure your Buildings Insurance policy starts right from the day when you sign the contract. Mind that if something happens to the property between the days when you signed the contract and actually moved in, you may get no insurance payout. Never give any false information when applying for insurance, as this will make your policy invalid. You are recommended to review and update your policy on a regular basis. Inform your insurance company in case you make any changes such as structural alterations.
In addition to the insured perils enumerated above, most policies will provide the landlord with liability protection in relation to the contents. Contents Insurance is normally taken out as part of Buildings Insurance and covers the damage to or loss of your possessions within the property.
Most Landlords Insurance specialists offer the option of a Limited Contents policy or a Full Contents policy.
Limited Contents policies are meant for unfurnished or partly furnished let properties. These policies typically offer coverage of such items as white goods, light fixtures and fittings, curtains, carpets etc. Landlords of even the most sparsely furnished property should consider purchasing the basic contents and liability coverage as cases of injuries to tenants or their guests caused by defective cookers, or light fittings are not rare and may result in substantial compensation claims. When purchasing Full Contents Insurance, make sure you value the contents for the cost adequate to replace them all. "Actual cash value" (ACV) pays only for what the items were worth at the time they were damaged or stolen, minus the deductible, while "replacement cost coverage" pays what it actually costs to replace the belongings you lost, minus the deductible. Replacement cost coverage involves greater premiums; however it pays to purchase this type of Contents Insurance as it will pay out more than ACV if you file a claim.
If you have any valuable and unusually expensive items such as jewelry, antiques, electronics etc, you should let your agent know about it. They may be covered up to a certain amount; however you may need to purchase a separate rider to be able to recover the full loss.
Legal Expenses Insurance
Some changes of tenants' personal circumstances during the tenancy term such as job loss, business failure, a break-up, accident or illness may affect their ability to pay rent, correctly maintain the property or may interfere with their plans to move out at the end of the tenancy. Such situations can involve substantial legal costs, lawyers fees etc. Legal Expenses Insurance will provide coverage for these expensive legal costs.
Rent Guarantee Insurance
Rent Guarantee policies ensure the rent is received regardless of the tenants' ability to pay. These policies typically guarantee rental payment for a fixed period from 6 to 12 months and include the legal expenses. Landlords who have a mortgage on the property and rely on the rental yield to service the loan and need to have their rent on a guaranteed basis, will find Rent Guarantee policies most beneficial.
Emergency Assistance is the coverage created for domestic emergencies at the property, such as leaking roofs and guttering, plumbing problems, failing electricity supplies or cooking facilities, damage to doors and windows etc. This type of insurance is recommended for landlords who do not live near their property, for example, living abroad. Typical Emergency Assistance policies provide parts and labor up to a specified cost.
Tenants Contents Insurance
Tenants Contents Insurance is often wrongfully overlooked. According to statistics, only 1-20 tenants have any Contents coverage at all. However it is important to understand that any items a tenant takes into the property make his/her responsibility to protect. A conventional home contents policy provides basic coverage for most insured perils but there can be some major gaps in the coverage you need as it is not specifically designed for tenants. Tenants having their contents damaged due to fire, flood, burglary, or other insured perils, may be left with the cost of replacing all the lost items out of their own pocket as the landlord has not insured their personal possessions.
The landlord's or condo association's insurance protects only the building but not your things in it. It's Renters Insurance that will protect your belongings in case of some insured disaster. Tenants have no obligation to insure the premises; however they should consider purchasing Renter's Insurance since the Landlord's Insurance does not cover the tenant's personal property and liability for personal injuries of third parties occurring on the premises.
In order to be compensated for any items you lose from a fire, storm or other catastrophe, make sure you inventory all your personal belongings. You should take a photo and list each item, its value, and serial number. You are also recommended to keep receipts for major items in a fireproof place.
In case your apartment becomes uninhabitable due to some reason covered under your policy, your insurance will cover your "additional living expenses." Your insurance company will pay you until your home has been repaired or rebuilt, or until you relocate. Some policies set a time limit for what the insurance company considers a "reasonable length of time," sometimes this period can reach 12 months.
Most renters and condo policies include liability protection in their standard package. If someone sues you for their injury on your premises, you will be covered for legal expenses and for what they win in a court judgment up to your policy's limit.
Your premium depends on a number of factors, including your location, your deductible, your insurance company, and whether you have obtained any additional coverage. You may lower your premiums by increasing your deductible, introducing more "protective devices," such as burglar alarms, smoke and fire detectors, fire extinguishers etc, or purchasing both an Auto and Renters policy, for example.
Rental property owners should carry four types of insurance coverage:
1. Property and Casualty Insurance (covers from fire, storm or other catastrophic losses).
2. General Liability Insurance (covers in case rental property owners are liable for compensating the third party's losses due to negligence).
3. Flood Insurance (designed for rental properties located in communities participating in the National Flood Insurance Program).
4. Umbrella Insurance (offers liability insurance coverage beyond the General Liability Insurance policy limits).
Both landlords and tenants should remember that they assume certain obligations the moment they create a tenancy. The landlord is obliged to follow the rules of the rental agreement and maintain the rental property in order, keeping common areas safe and clean, providing necessary facilities to supply hot and cold water, heat and electricity, adequate locks etc.
In case a landlord fails to perform his/her duties, the tenant has the right to terminate the rental agreement after giving written notice to the landlord or initiate litigation or arbitration proceedings. The tenant can also make some repairs and keep back their cost from the rent sum.
In order to use any of the above-mentioned Landlord-Tenant Act's remedies, the tenant must be current in rent payments, and should give the landlord written notice of any defective condition.
In their turn, tenants are obliged to pay rent; keep the property clean; not cause any damage to the items on the premises; use fixtures in a proper way; keep the property in its initial condition etc.
In case the tenant fails to perform his/her duties and does not maintain the premises in appropriate order, for example, the landlord may make repairs and charge the tenant for it; evict the tenant; or sue the tenant for damages etc.
The agreement between the landlord (lessor) and tenant (lessee) which establishes a tenant's right to use property for a certain period of time in exchange for rent payment is called a lease or a rental agreement. It is essential to carefully read a rental agreement and discuss all the terms of it and all possible changes before you agree to it. Remember that the liability of each party varies depending on the terms of the rental agreement.
Rental agreements for furnished apartments or homes should contain a detailed inventory of furniture and other personal property and also include such things as the specifics of the arrangements, the condition in which the items are, who is responsible for maintenance, repairs and utility charges etc.
A periodic tenancy (e.g. a month-to-month tenancy) is the most common tenancy type. It is normally automatically renewed unless either the landlord or the tenant wants to terminate the tenancy. In this case the landlord or the tenant should give written notice at least 20 days prior to the end of the month. As for the rules and the rent in a periodic tenancy, they may be changed upon 30 days' written notice.
"Tenancy for a specific term" is another tenancy type designed for a specified period of time and automatically terminated at the end of the rental period. The rules of the tenancy cannot be changed during the specified period without the agreement of both the landlord and the tenant, and the tenant cannot break the lease except for such situations like a major breach of the lease by the landlord.
If you are a landlord, you are most likely to look for ways to reduce your risks and limit your personal liability. For example, you can practice risk management techniques, as well as purchase a personal or commercial umbrella insurance policy and be selective about all tenant and employee applicants. If you violate your obligations under the rental agreement as a landlord, a tenant may terminate the tenancy without liability.
If you are a tenant, make sure to inspect the property to see if it is in acceptable condition before you rent it. Make a list of all existing defects or damages, and sign it with your landlord, keeping a copy of it. If you violate your obligations as a tenant, the landlord may terminate the lease through eviction proceedings.
Landlord-tenant problems can be solved through arbitration process, with the administrative fee shared equally, or by means of informal mediation, when a third party intervenes between the disputing parties to reach a certain agreement or compromise. Mediation can be requested by either a landlord or tenant and may be available without charge from city or county agencies. In case the parties are dissatisfied with the mediation process, they may claim legal remedies.