A fire can cause serious damage or the total loss of a home. When the fire occurs in a rental home, there are a variety of complications regarding insurance and payment. While most insurance policies designed to protect any dwelling cover accidental fire damage, there is a fine line between the landlord’s coverage and the tenant’s coverage in a rental home. This confusion can leave landlords wondering if landlord insurance will provide enough coverage in the event of a fire and if you need an additional policy.
Potential Financial Losses Due to Fire in a Rental Home
Fire damage to a rental home affects the home’s owner/landlord and the tenants residing in the home. While property damage is typically considered the biggest loss, many other factors affect a landlord financially. These are some expenses you can expect to face if your rental property is damaged by a fire.
- Restoration Costs: Even if the fire didn’t completely destroy the home, significant damage will need to be repaired. In the event of a fire that doesn’t result in a complete loss, smoke and water damage are a large portion of the repair costs.
- Legal Fees: If your negligence led to an incident that caused the fire or you don’t have the proper insurance coverage, your tenants can sue. You may be responsible for medical fees, property damage costs, and court costs.
- Relocation: Your tenants need a place to stay while repairs are being made. If you’re responsible for several tenants (like those in a condo complex or apartment building), the costs add up quickly. Unless the fire was started by your tenant, you’re responsible for this cost.
- Lost rental income: Your tenants won’t be paying rent while repairs are being made. This leaves you with a large income gap.
Who Covers the Costs of Fire Damage in a Rental Home?
Untangling where the responsibility belongs in a rental home fire can be complicated. The fire’s damage requires multiple insurance policies. Understanding the terms of your insurance policy is the key to knowing what to expect in the event of a fire. It’s possible that both your insurance and the insurance purchased by your tenants will pay for different types of damage from the same fire. The breakdown of who pays for fire damage in a rental home may include these parties.
As a property owner, you are responsible for fire damage related to the structure of the building. Your landlord insurance policy should cover damage to the building, including plumbing, electrical, and even appliances provided with the rental home like a stove and refrigerator. Thus, check your policy to ensure appliance coverage.
As a landlord, you are not responsible for your tenants’ possessions. That’s why it’s important for your tenants to purchase a renter’s insurance policy to protect their possessions. Your tenant’s insurer will cover damages to all covered belongings like personal items, furniture, electronics, and clothing. It’s always a good idea to purchase rental insurance with your rental agreements when a tenant moves in.
If your tenant fails to purchase renter’s insurance, they are responsible for the cost of their damaged belongings. Additionally, if the tenant (or a guest of the tenant) is responsible for starting the fire, they may be responsible for paying the landlord’s deductible on damages to the building.
If your negligence caused the fire, and you have no liability insurance, you’ll be paying out-of-pocket if your tenant decides to sue. Additionally, if your insurance has gaps that leave you without the proper coverage, you may be stuck paying for all the damage yourself.
Commercial Fire/Landlord Insurance
When you have a landlord insurance policy, your commercial fire insurance is typically a component of your policy. How much your commercial fire insurance covers depends on the details of the policy and the amount of coverage you chose to purchase. Depending on the terms of your policy, your fire coverage might pay for the following.
- The structure of the building
- The property you supply in the rental home or building like appliances and furniture
- Others’ property in your possession. This includes borrowed property or contracted workers’ equipment. However, this does not include the tenant’s belongings.
While commercial fire policies have limited coverage, your landlord may include other coverages, including
- Loss of income coverage
- Relocation coverage
- Damage from extinguishing the fire like falling objects, water damage, extinguisher foams, and fire department fees
- Law and ordinance coverage to take care of the costs related to upgrades needed to meet updated local building codes and ordinances.
How a Rental Home Fire Affects Your Tenants
As a landlord, a fire in your rental home causes significant financial difficulties. Your tenants face a variety of difficulties as well. In a devastating fire, your tenants may lose their home, belongings, and be facing medical bills related to the incident. How the tenancy depends on the circumstances surrounding the cause of the fire and related damage.
If the fire wasn’t caused by the tenant, and the property is completely destroyed, the tenant has the option to terminate the lease. However, if the property is uninhabitable, but not completely destroyed, the tenant cooperates with the landlord’s repair efforts for the remainder of the lease period. In this event, the landlord pays for the tenant’s inconvenience, lost wages, and relocation. If severely damaged, the landlord and tenant can terminate the lease together.
If the tenant caused the fire, they pay certain costs to the landlord. In this event, the landlord has the option to terminate the lease while holding the tenant responsible for rental payments.
Learn More About What Landlord Insurance Pays for After a Fire
When damage occurs in a rental home, both the landlord and tenant have certain responsibilities. For this reason, both parties should obtain the complete coverage they need to protect their assets. To learn more about the role of landlord insurance, get in touch with the experienced agents at LoPriore Insurance today. Our staff is standing by to answer your questions, provide a quick quote, or provide information about our available insurance policies. Leaving gaps in your insurance coverage can lead to financial disaster. Talk to an independent insurance agent to get a firm understanding of the coverage you really need.