# Insurance for rental property?



## dbw (Dec 8, 2011)

I just invested in a rental property with an existing tenant on a long term lease.
I thought it was a good decision on a great investment, but starting to run into problems only a couple of weeks in. 
First with a late rent payments (and only partial) with several days to pay in full (long story).
Then after I finally got the rent paid in full, the Tenant threaten to seek a lawsuit for 10K in damages, even though the lease contract indicated that he is responsible to insure his own properties/contents, he listed some reasons of why it's not covered by insurance and the condo & myself are responsible, anyway there's a long story for that too.
The bottom line is that I think I might have invested in a property with problem tenant.
My question is: Do I need to purchase any additional insurance even though the Condo Management already has insurance for the building and the lease contract indicates that the tenant is responsible for his own insurance for his properties ?


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## Xoron (Jun 22, 2010)

Yes, you need liability insurance. This protects you (the owner) in case your tenant does something to cause damages to the condo common elements or other units (think overflowing tub, or washing machine that leaks). This does not cover the tenants belongings

The tenant needs insurnace to cover their belongings. If they don't and there is a fire / flood / theft, they get $0


So ultimately there are 3 insurance policies in play:
Condo - Common elements
Landlord - Liability
Tenant - Content insurance.


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## dBII (Mar 12, 2013)

Absolutely. You need liability insurance, but also contents insurance to cover you for anything you own in the condo. That includes appliances, flooring, everything that is not owned by the tenant or the strata. Fair warning though, the cost of insurance for rentals is tres mucho~.


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## MoreMiles (Apr 20, 2011)

Liability insurance!

Can you imagine he claim that he fell on uneven kitchen tiles and broke his wrists? He then sue you for $2 million for negligence in maintaining a safe environment? There are lots of personal injury lawyers waiting with "we don't get paid until you win" advertisements. Don't take any chance! You don't want people knocking on your door serving a claim paper by hand.

The paranoid type will even own their rental property in a corporation so any lawsuit is limited to the value of that corporation.

Right now, everything you own, not just the condo, is at risk if there is a lawsuit from him!


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## dbw (Dec 8, 2011)

Thank you for all the replies, I will get it right away.


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## Just a Guy (Mar 27, 2012)

Shop around though, I had quotes ranging from $150-500 for the same coverage on the same property.


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## dbw (Dec 8, 2011)

I just re-read the lease agreement and there were 2 conditions which stated that the "Tenants to obtain insurance to cover their properties and personal liability" and the Tenant is "financially responsible for any damages done to both interior and exterior of the premises". Are these conditions sound like they should cover my liability? Or I should still get it anyway?
By the way, I already contacted my insurance broker about liability insurance but they told me that I now have to fill up an application form and go through a review/approval process as there's already a period gap with no insurance since I took possession.


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## MoneyGal (Apr 24, 2009)

The issue is not the tenant's personal liability or damage they do to your or another's property, but YOUR liability w/r/t your property.


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## Cal (Jun 17, 2009)

Having said that, you may want to consider paperwork to have the tenant leave the next time they do not pay you in full on the 1st (or whenever it is due), even if you do not have them leave, they at least know you expect payment in full when it is due.


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## dBII (Mar 12, 2013)

MoneyGal said:


> The issue is not the tenant's personal liability or damage they do to your or another's property, but YOUR liability w/r/t your property.


That is 100% spot on. The "Tenant's Liability" would only cover him for liability that the TENANT has inflicted on someone else, which has no bearing on you as the owner. You are definitely not covered for liability.


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## Just a Guy (Mar 27, 2012)

Then you'll also be covered if your tenant cancels his insurance to save a few bucks. Always cover your own butt. Control the things you can, there are plenty of things you can't when it comes to real estate.


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## sharbit (Apr 26, 2012)

the user "abroad" must be the tenant :tongue-new:


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## Xoron (Jun 22, 2010)

dbw said:


> Are these conditions sound like they should cover my liability? Or I should still get it anyway?


NO! The only thing this does is "possibly" get you off the hook for the tenants contents if there was a fire / flood.

When lawsuits start flying, the person with the deepest pockets get sued first. You (as the landlord) likely have more assets than the tenant. You need to protect yourself.

I was told very wise words once. Insurance is to cover things that are financially crippling. Being sued for 2M would be pretty financially crippling for most people.


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## dbw (Dec 8, 2011)

Thank you for your advices, I'm going to "apply" for the Liability insurance. My insurance company informed me that because I didn't get it before the closing date, I have to submit an application for their approval. I'm also going to get several quote as suggested by Just a Guy, can you recommend one in the GTA area? Thanks


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## Xoron (Jun 22, 2010)

dbw said:


> My insurance company informed me that because I didn't get it before the closing date...


I'm assuming you have a mortgage on this property? I'm surprised that you could get the deal closed without liability insurance. Someone was asleep on the job on that one.

As for brokers, you could try CRE (Campbell Roy and Elridge). But just about any insurance company out there should be able to offer coverage.


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## Just a Guy (Mar 27, 2012)

Talk to a real insurance broker, there are some who only front for 1 or 2 companies. In a way it's very much like the mutual fund industry where they push the ones with the highest kickbacks. 

There are usually only a handful of insurance companies and each will only quote you once. Watch for some things like restore value insurance. Often they put it at the value of the property. If your in a condo (as opposed to a house) and the place is destroyed, the condo insurance will restore it to the original condition. If you've made improvements since the (let's say hardwood instead of cheap carpets) your insurance covers the upgrades, but the retail value of the condo is usually way to much. I usually only get about 25k coverage. If you insure a house, you need this number to be high enough to cover rebuilding the house, but you don't need to buy the lot again (which is factored into the retail price of your property), so you can lower this coverage a bit too. 


Also, as far as contents, I usually don't bother as I may only provide up to 5 appliances which I can replace fairly cheaply anyway.


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