When managing or owning a rental property, two things should come to the top of your priority list. One, maximizing the long-term potential of the investment and two, minimizing the overall liability/risk associated with it. Today this article is intended to help you minimize the risk associated with rental property.
What is TLI?
TLI or tenant liability insurance is an insurance that protects you the landlord and the tenant in the event of tenant negligence. Imagine your tenant deciding to place their bbq grill in the living room to cook dinner because it’s snowing outside. The home catches fire, and the tenant is now out of a place to live and you have just lost your investment. Seems crazy right? It’s happened before. Here in lies the beauty of TLI.
What does it cover?
Losses, which may include fire, explosions, burst water pipes, storms, theft, and overflow of a sewer or drain, even riot or commotion and most especially, simple negligence that can get out of hand are inevitable. It can be a cause of a headache when dealing with maintenance and other various legal liabilities. That is the reason why Tenant Liability Insurance or TLI is a requirement for every lease application with ICPM. Both owners and tenants simply enjoy the benefits of this program because it covers what we most think to be impossible or simply just didn’t expect to happen. Let me share an example.
“During one of our routine inspections, we discovered that a bathroom shower surround had been leaking behind the tiles. On the surface, it looked like several tiles had become loose but when a maintenance professional examined the surround they discovered that it was much worse than expected. Mildew and rotten sheetrock to almost the entire surround. This is a classic case of what we classify as “unreported maintenance.” The great part here is that the tenant had TLI, and the damage that was caused based on negligence was covered under the policy.”
Another example of how TLI can be a huge saving to the owner and tenant alike is a case of flooding we had recently.
"In the middle of the night, one of our tenant’s got up from bed to use the restroom. After completion, he didn’t realize that he had clogged the toilet and went straight to bed and fell back asleep. When he woke up the next morning, he placed his feet on the carpet to discover the toilet had been running over since he had last used it. He immediately reported the flood and remediation took place. After carpet extraction and baseboard repair, a $4,000 damage invoice was issued. The clog was not the fault of the toilet or the plumbing and was caused by the tenant. Because the tenant was enrolled in our TLI program, the full invoice was covered. The tenant was thankful because he didn’t have $4,000 to pay the bill out of pocket and the owner was extremely happy because his investment was put back together at no cost to himself. TLI really did a huge service to both the tenant and the owner and could have been a large burden if this wasn’t in place.”
It is then understandable that Tenant Liability Insurance or TLI is an ally and a great way to leverage in every lease agreement. It can help save tons of dollars for unexpected circumstances that can totally go out of control no matter how conscientious one may be. Protecting yourself against these stressors can not only boost a better mental and physical living condition for your tenants, but it is also helpful to alleviate a stressful and unpleasant experience for you, yourself the landlord. It is always the goal to get a home back in a great living condition when a major damage occurrence happens as quickly as possible. After all, the entire point is to limit risk and maximize long term potential.
Key things to be aware of:
Often times, renter’s insurance coverage automatically has a tenant liability piece built into it. Regardless, make sure you require your tenants to carry such insurance because renter’s insurance alone will not protect your asset, it will only protect theirs.
Another key takeaway is, you want to make sure you the landlord is listed as an “Additional Insured.” Being listed as an “Additional Insured” is the glue that holds it together. This key component allows the entity (whoever is listed as the Additional Insured) to be made aware of policy lapses and allows you to contact the insurance company and address claims when needed.
One last main factor to consider is the deductible required by the insurance company when a claim happens. Make sure you know this number as it may be difficult for you to collect from the tenant in the event of a claim. Most policies have a zero (0) dollar deductible but are something you need to know about.
How do we know the right coverage for us?
Providers differ in the way they package inclusions and the amount of coverage. You can definitely require a certain amount of coverage in your lease agreement but consult your attorney first. One hundred thousand are the most common we see and are readily available.
How much does it cost?
Costs can vary depending on how much you want to be covered. Other factors will include the current status of the property, the location, and history of claims can affect the premium rates. Other than that, you set your own limit to the amount of coverage you want to take in. Again, this is a cost the tenant would face and we see ranges between $9-$13 a month.
At the end of the day, what matters most are the things that we do to help us move forward.