Liability coverage: A key part of renter’s insurance

Wendy Levine

When you think about renter’s insurance, you probably think about protecting your valuables from theft or damage. But that’s only part of it. Renters should consider another aspect of coverage – liability. A standard renter’s policy also covers personal liability, and you’re just as likely to need it.

If you own a pit bull or run a business from home, you’re probably aware of how liability coverage can protect you. But what if you have a candle collection, a slippery area rug or a second-floor bathtub? Accidents happen, and the liability portion can protect you from the repercussions of your own actions.

Ron Hoefer, CEO of Milestone Insurance in California, says liability coverage is something renters tend to forget they need – so they don’t purchase any rental insurance at all – but they do so at their own peril. An uninsured mishap today could lead to lawsuits, medical bills and even bankruptcy.

Your life can be “impacted because you didn’t take out that little $250 to $300 renter’s policy,” Hoefer says. A standard renter’s insurance policy costs an average of $17 to $25 a month.

What’s the worst that could happen?

Say you call a handyman to fix something in your apartment. If that handyman falls and injures himself inside your apartment, you could be sued for his medical expenses as well as his lost wages. If you cause a fire that spreads, you’ll likely be held responsible for damage to your apartment and your neighbors’ apartments. In these cases, liability coverage under your renter’s policy will kick in.

With a standard renter’s policy, medical payments will be covered when someone is hurt inside your place or even off the premises (if your dog injured someone at the park, for instance). Also, according to the National Association of Insurance Commissioners, “personal liability coverage will cover damages and costs of defense required by a lawsuit brought against the insured.”

Leave the water running or a cigarette burning? It’s common, but any ensuing damage is your responsibility. Assurant Specialty Properties, a company that sells renter’s coverage through American Bankers Insurance Co. of Florida, reports that water and smoke damage account for billions of dollars in losses for renters each year.

A liability policy will cover the damage and protect you from most claims or lawsuits. Be forewarned: Your renter’s insurance policy will cover only you and the damage you (or your family or pets) cause. If a roommate causes the harm, he needs his own policy to cover the damage.

Insurance required?

Although renter’s insurance is not required in any state, many managers of large properties insist tenants show proof of coverage before they can move in, or they even include renter’s insurance as a requirement in their leases. Without the requirement, many renters incorrectly assume the landlord will take care of any damage in their apartments.

“The landlord does not cover anything inside the unit,” says Hector Flamenco, a State Farm agent in California.

Flamenco says renters buy coverage only when property managers require them to do so.  Landlordsthat do not require renter’s insurance leave themselves exposed to paying out-of-pocket for damages caused by tenants, he says. As a result, more and more apartment complexes are requiring their tenants to buy renter’s insurance.

Allen Manansala, assistant manager of California apartment landlord Irvine Property Management, says his company’s properties in the San Francisco Bay Area mandate at least $100,000 in personal liability coverage for each tenant. Before, if a tenant lacked liability insurance and was at fault for an accident or catastrophe (such as an apartment fire or flood), the landlord would have to sue the tenant to get money for damages, Manansala says. 

Manansala recalls an instance in Los Angeles when a tenant ran a bath and fell asleep. The tub overflowed, and the water trickled down to the neighbor’s apartment; both apartments were damaged. The tenant’s liability coverage paid for repairs to both residences.

Lesser-known benefits

The Insurance Information Institute points out that a renter’s insurance policy might offer more protection than you think.

For instance, “additional living expenses” coverage usually is included in standard renter’s policies. This means that if you need to relocate after an insured disaster at your apartment, expenses related to moving, temporary rentals and even meals can be reimbursed. Just make sure you read your policy closely and save your receipts.

Are You Currently Insured?