What happens if your tenant, distracted by their phone, leaves the water running and floods their bathroom? Not only is there damage in the bathroom and to their own belongings, but it’s poured down into the unit below, damaging more private property. Not only are you looking at a hefty bill, you could be named on a lawsuit for damages, which will at least require a lawyer’s time if not more.
“In that scenario you would be able to recover damages through their home insurance policy,” says Square One Insurance President and CEO Daniel Mirkovic. “If there was a lawsuit, which often nams everyone and anyone, you’re going to have to defend yourself, at least getting you name removed.”
If your tenant had liability insurance, this situation, and many other scenarios caused by tenant negligence would be covered.
But that's a big if, according to new research from Square One, showing just 60% of tenants have home insurance.
Some tenants think they are covered by their landlord’s insurance – a misconception investors might want to disabuse them of.
It is possible to extend your insurance to cover a rental unit in your primary property, such as a basement suite, but in general the insurance a landlord has to cover their investment is very different to the home insurance a renter might need.
There were other advantages for landlords in asking whether potential tenants are insured.
“It can do a bit of the filtering process for you,” Mirkovic says. “It shows they are financially stable and they value the possessions that they have.”
Are you looking to invest in property? If you like, we can get one of our mortgage experts to tell you exactly how much you can afford to borrow, which is the best mortgage for you or how much they could save you right now if you have an existing mortgage. Click here to get help choosing the best mortgage rate
There are plenty of things to worry about when it comes to tenants, but few landlords require their tenants to take out home insurance – many don’t even ask if they have it. But there are good reasons to ask.