REInsurePro’s Tenant Protector Plan (TPP) is a truly distinctive offering that helps investors and their tenants in the event of a property loss caused by tenant negligence. While we always recommend that landlords require their tenants to carry renters insurance, the TPP adds an extra layer of protection for both parties. Below, we will outline the coverages typical in a renters policy, what the TPP covers, and how the two work together and in conjunction with the property policy.
Renters Insurance Coverage
As you are likely aware, most standard renters insurance policies include coverage for personal property, loss of use, and personal liability (including medical payments). If the landlord (your investor client), carries contents coverage on their property policy, this only covers items owned by themselves, not any of their tenants’ belongings.
How does a tenant’s renters insurance help a landlord?
As the property owner, we assume your investor clients carry property insurance to help cover costs if their property is damaged. The frequency or severity of property claims can affect future rates or ability to obtain coverage. So, what if that sudden loss occurs because a tenant left a candle burning or clogged the toilet? The investor client’s property insurance will likely make them whole, but by no fault of their own, their loss history is affected.
If a tenant has renters insurance, your investor client’s property carrier can subrogate the losses against the tenant’s policy as the truly negligent party. So, after the property insurer settles the claim, they will, in turn, submit a claim to the tenant’s insurance for that carrier to reimburse them for the loss they paid out up to the personal liability limit. This lowers the investor client’s loss ratio, and makes insurers look more favorably on them.
Alternatively, if a tenant invites a guest over and their negligence leads to that guest getting injured on the premises of your investor client’s property, the injured party can sue any party related to the incident. As the property owner, your investor client is at risk. If the tenant is found to be legally liable, their policy will cover the defense costs, legal settlements, and medical payments (up to any stated limits) rather than your client’s premises liability. Your investor client should require that the renters insurance policy lists themselves, the landlord, and the property manager as Additional Insured so that both parties are covered if drawn into a lawsuit.
What does TPP add to the equation?
Sometimes a tenant will move in and show the landlord (your client) their proof of renters insurance only to stop making payments and have their coverage canceled a few months later. This leaves the investor client thinking they have an extra layer of protection, only to find out when it’s too late that it is not in force. This is where the TPP can give your clients peace of mind, as well as a few additional benefits. The TPP is purchased by the property owner and provides that limit of liability that can help alleviate property loss history for tenant-caused, negligent losses. If the renters insurance is not in place, your client’s property carrier can subrogate against the TPP instead. It also provides $10,000 of contents coverage for tenant belongings. For this reason, some landlords include the cost of the TPP in their lease.
In addition, the Tenant Protector Plan also provides three other coverages that make it such a unique product. The first is a sublimit of property coverage for Sewer & Drain Backup. This means that if a toilet overflows or clogged sewer line forces water back into the house (whether due to tenant negligence or not), your client is able to recover up to $10,000 for the repairs that damage may cause.* This is one way for the investor to buy back this coverage that is excluded on their property policy.
Next, there is a sublimit for the belongings of tenants in adjoining units that may be damaged as a result of another tenant’s negligence. Take for instance, a duplex. The tenant in unit A causes a kitchen fire in their unit causing smoke damage to the furniture and clothing in unit B. The tenant of unit B can recover up to $2,500 to replace their damaged items.
The other coverage any landlord will find beneficial is up to $1,000 in Skip Rent coverage. This allows the landlord to recover the last month’s rent (up to $1,000) in the event of unexpected vacancies. This can include a tenant who up and leaves mid-lease with no warning, military deployment, a tenant who passes away unexpectedly, or a finalized eviction.
How does it work if the tenant has renters insurance and the investor has TPP?
The TPP works in excess of any renters insurance in place. So, in the instance where a tenant-caused negligent loss causes $70,000 worth of damage and the tenant’s renters insurance has a $50,000 limit of liability, the investor client’s property carrier can collect $50,000 from the tenant’s insurance carrier, and another $20,000 from the TPP carrier to make themselves whole.
While the TPP and renters insurance have some crossover, the added layer of protection and peace of mind the TPP can provide is well worth it when, and if your investor client should need it.
* Please note that this only applies for clients that are on the policy with a $60,000 or $100,000 limit of liability. This sublimit does not apply for clients on the policy with a $50,000 limit of liability, but that policy requires that the Sewer & Drain Backup is tenant-caused in order for coverage to be afforded. Contact your Sales Manager with questions.