September 18, 2018 11:00am

he city of Cleveland and adjacent suburbs, Lakewood, Parma, and Cleveland Heights to name a few, are popular “homes” for residential rental properties. Several local first-time property investors begin with a single or double-family home in these areas to build a nest egg. Some investors stay, some move on, and some expand. No matter where you choose to purchase a residential rental property, whether the property is a single-family home or 100-unit apartment complex, there is one constant … tenants.

As the landlord/owner, you receive rent and are expected to keep the property in habitable condition, comply with city ordinances, and hold up your end of the rental agreement. Of course, you need your own property and liability insurance to protect both you and the investment property. What about also requiring your tenants to maintain their own property and liability insurance?

The landlord/owner may insist tenants buy renter’s insurance and incorporate this requirement in the written rental contract, signed by the tenant and landlord at the start date of the lease. Why? An informed tenant might be a more responsible tenant. Tenants have their own personal property on site, and the landlord’s property insurance will not provide coverage for direct loss to a tenant’s personal property. Many tenants are unaware of this and do not have tenant’s insurance. If a major fire damaged their rental home, they would not only lose their personal belongings, but there would be no insurance coverage to replace them … unless the tenant has renter’s insurance.

Tenants also have obligations beyond paying rent, one of which is responsibility for activities under their control and/or direction on the rental site. It makes sense that tenants be required to maintain a minimum level of tenant liability insurance. Suppose a tenant has a party in his apartment, and guests become rowdy and damage the landlord’s property.  While the landlord’s own property insurance policy would respond to property damage to the landlord’s property, the tenant is still legally liable for property damage due to the acts of his guests. The tenant’s liability policy would pay damages (subject to policy conditions), which would allow the landlord to refrain from submitting a claim to the landlord’s property insurer. This example is a legitimate shift of risk to the tenant by the landlord/owner. It is one way for the landlord to control his insurance loss history, which helps keep the landlord’s insurance affordable. 

There are varying opinions and practice on the issue of whether or not the landlord/owner should be listed as additional insured on the tenant’s insurance. Some insurers will do so routinely, and others absolutely will not allow it. Given that the landlord has a valid interest in knowing that tenants keep insurance in force as required in the lease contract, most insurance companies will list the landlord/owner as “additional interest” on the tenant’s insurance. “Additional interest” gives the landlord/owner no rights under the tenant’s insurance other than notification, if the tenant’s insurance lapses or is cancelled.

If you own or manage residential rental property, contact your Trusted Choice Independent Insurance Agent at Richey-Barrett Insurance to discuss your insurance options.

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