Owning a rental property is a great source of income, but it’s also a risky endeavor. While it’s possible to insure against those risks, there can be some confusion about where the landlord’s responsibility stops and where the tenant’s responsibility begins.
In New Jersey and other states, Muller Insurance helps landlords navigate obtaining the right amount of coverage. Here, we explain what tenant-occupied insurance does and doesn’t cover so you can protect your assets and inform your tenants of their responsibilities.
What Is Tenant-Occupied Dwelling Insurance?
Tenant-occupied dwelling insurance is also called landlord insurance or rental dwelling insurance. It covers a dwelling or property that is occupied by a tenant – not by the owner. As a general rule, the policy level that’s best for you will depend on your financial needs and limits, your building, and a variety of other factors. Like home insurance, tenant-occupied dwelling insurance comes in three levels, including:
- Basic dwelling property insurance (DP-1): The most limited and basic type of policy, DP-1 provides cash-value reimbursem*nt for a limited number of perils named in the policy.
- Broad dwelling property insurance (DP-2): Slightly more comprehensive than DP-1, this level provides replacement-cost reimbursem*nt for named risks and events.
- Special dwelling property insurance (DP-3): The most comprehensive level, DP-3 provides replacement-cost reimbursem*nt and doesn’t limit coverage to perils named in the policy.
What Does It Cover?
Individual policies may vary depending on the level of coverage, insurance provider, and your own needs and requests. In general, however, a tenant-occupied dwelling policy includes the following types of coverage:
- Dwelling coverage that protects the dwelling itself against accidents, natural disasters, fires, vandalism, and theft.
- Other structures coverage that protects structures included with the property but are detached from the dwelling (i.e. garages, barns, storage units, and sheds).
- Personal liability coverage that protects against lawsuits and provides medical payment if the following occurs:
- A tenant or guest is injured on your property.
- A tenant sues for property damage or negligence.
- Income loss coverage that protects your rental income by reimbursing you when tenants vacate due to a covered event.
- Personal property coverage that protects any personal property, such as appliances, that you leave on-site for tenant use.
Some policies also cover tenant damage. Accidental damage is the most common type of damage covered, but intentional damage is usually not covered. Tenant-occupied dwelling policies also generally exclude flood or earthquake damage. If your property is near water or in an area vulnerable to earthquakes, you should consider investing in additional earthquake or flood insurance.
Responsibilities of Tenants
Tenant-occupied dwelling insurance is designed to protect the property owned by the landlord, and that’s where it stops. Any property owned by the tenants must be covered separately. A renters’ insurance policy held by tenants will cover their personal property in case of disaster, and for this reason, most landlords require tenants to own a renters’ insurance policy. To learn more about tenant-occupied insurance and finding a policy for your building in New Jersey or beyond, contact us today.
FAQs
Keep in mind that your policy will exclude certain perils: Property damage to your buildings, roof, and siding (these are covered by your landlord) Water damage caused by flooding or underground water. Damage caused by earth movements, such as earthquakes and landslides, or caused by nuclear hazard.
What is tenant occupied insurance? ›
What Is Tenant-Occupied Dwelling Insurance? Tenant-occupied dwelling insurance is also called landlord insurance or rental dwelling insurance. It covers a dwelling or property that is occupied by a tenant – not by the owner.
What is the biggest difference between homeowners and renters insurance renters insurance does not cover the ________? ›
The main and most obvious distinction between renters insurance and homeowners insurance is that a homeowners policy safeguards the home's physical structure against covered perils while renters insurance won't protect the home or building occupied by the tenant.
What are 3 examples of things that could occur that renters insurance wouldn t cover? ›
Your personal property, personal liability, additional living expenses, and guest medical expenses are usually covered under your renters insurance. It typically does not cover earthquakes, floods, bedbugs, mold, or damage to the exterior of the building.
Which of the following is not covered by renter's insurance? ›
Flooding, earthquakes and sinkholes are all examples of natural disasters that are not covered by a typical renters insurance policy.
Which of the following should be covered by renter's insurance? ›
Renters insurance covers personal property, personal liability, medical payments and additional living expenses or loss of use, up to the limits of your policy.
What does "tenant occupied" mean? ›
Tenant occupied means that a tenant currently lives in the property and has a lease agreement with the landlord. It is common for real estate listings to specify whether a property is a tenant occupied or not, as this can be an important factor for potential buyers.
What is occupancy insurance? ›
Occupancy is the part of an insurance contract that describes who lives in the home and if they live there full- or part-time.
What is the purpose of renters insurance? ›
Renters insurance protects your personal property in a rented apartment, condo or home from unexpected circ*mstances such as theft, a fire or sewer backup damage – and will pay you for lost or damaged possessions. It can also help protect you from liability if someone is injured on your property.
What types of things are typically not covered by homeowners? ›
Termites and insect damage, bird or rodent damage, rust, rot, mold, and general wear and tear are not covered. Damage caused by smog or smoke from industrial or agricultural operations is also not covered. If something is poorly made or has a hidden defect, this is generally excluded and won't be covered.
A standard renters insurance policy includes coverage for personal property, liability, additional living expenses and medical payments to others.
Does renters insurance cover everyone in the house? ›
Does renters insurance cover all roommates? Your renters insurance generally won't cover your roommates' things unless they're related to you or their names are listed on your policy. Unrelated roommates should generally buy their own renters insurance.
What situations does insurance not cover? ›
Perils Generally not covered by a Homeowners Policy if Damage is caused by:
- Flood.
- Earthquake.
- Earth movement.
- Termites.
- Insects, rats or mice.
- Water damage cause by seepage or leaks.
- Losses to house vacant for 60 days or more.
- Mold.
Renters insurance (sometimes referred to as "tenant insurance") helps cover unexpected events — otherwise known as covered perils. You may not always be able to prevent certain situations, such as theft, a break-in or a visitor's injury, and that's where renters insurance comes in.
What are 2 reasons people typically do not get renters insurance? ›
Landlords have property insurance, but those policies are designed to cover the building, rather than your personal items. Many renters don't purchase renter's insurance, either because they don't think it is necessary or believe they are covered under the landlord's policy.
What perils are typically not covered by renters or homeowners insurance? ›
Earthquake, flood, mold, earth movement, and “wear and tear” are some of the perils that are usually excluded.
Does renters insurance cover spoiled food from a broken fridge? ›
Your policy may cover spoiled food, depending on the cause. Depending on the cause of the damage, your renters insurance policy may cover food loss (for instance, if your fridge fails or is damaged and everything inside spoils).
What are the three major parts of a renter's insurance policy? ›
Renters insurance has three basic coverage components: personal possessions, liability, and additional living expenses.
Does renters insurance cover damage to flooring? ›
Does renters insurance cover carpet and floor damage? Renters insurance won't cover the physical structure of the apartment, condo, or house you're renting. Your landlord's policy may cover damage to the floors or carpet from a covered peril.
