Insurance May Not Cover the Full Costs of a Fire in Your Rental Property

A building fire is one of the most damaging things that can happen to any property, but a fire in an apartment or condominium has the potential to be devastating. Not only are a greater number of residents at risk of injury and loss, but a fire that destroys the structure can put the tenants out of their homes and the landlord out of business. Attorney Bill Voss helps owners and landlords of rental properties prepare for these events and offers tip to get your rental property restored as quickly as possible.

Whose Insurance Pays for Fire Damage to a Rental Property?

Any owner who does not live in the same home as the tenant will need to purchase a separate fire insurance policy for the rental property. Failure to obtain property owner’s insurance for a rental will only result in denied claims or insufficient coverage. Basic policies will cover damage to the structure (including the roof and foundation), while more inclusive types of commercial fire damage coverage may cover other buildings on the premises, landscaping, and commercial vehicles.

After a fire, the costs of damage may be paid by:

• The owner’s or landlord’s insurer. Property owners are ultimately responsible for any fire damages involving the structure, electrical system, plumbing, and provided appliances (such as a stove, refrigerator, or clothes dryer). Standard fire policies may not automatically include coverage for appliances, so owners should be sure to purchase additional coverage for each specific item included as part of the rental.
   
• The tenant’s insurer. Owners are required to insure only the property, not the contents of each rental unit. Just as the owner would file a claim on his own policy for damage to the structure, the tenant is responsible for filing a claim with his own renter’s insurance to cover lost furniture, electronics, clothing, and other belongings.
   
• The tenant. If a tenant does not purchase renter’s insurance, it falls to the tenant personally to cover the costs of any lost or damaged belongings. If the tenant (or a guest of the tenant) was responsible for starting the fire, the landlord may also seek a claim against the renter for the deductible for the landlord’s insurance or for the costs of damages not covered by insurance.
   
• The landlord. Landlords may be held personally financially responsible if they have insufficient insurance to cover the costs of the damage. If an owner’s policy has gaps in coverage, such as failure to insure the correct number of dwellings, the insurance company will likely not cover damages. Additionally, a tenant can sue a landlord for negligence related to the fire, and a landlord without liability insurance will be on the hook for these damages as well.

How Much Will My Commercial Fire Insurance Company Pay?

The amount of coverage you will receive in a fire damage claim depends on the terms and limits outlined in your commercial policy. For this reason, it is vital to choose coverage that fits both your specific needs and your budget. Owners of condos, apartments, and other rental properties can suffer significant losses after a fire, including the costs of:

• Relocation. Most rental property policies offer relocation coverage in the event that a tenant is displaced due to a fire that was not his fault. In large complexes with multiple dwellings, this cost quickly adds up.
   
• Restoration. Smoke, water, and fire damage all pose particular dangers to your property. Once you have documented all of your losses, you must begin rebuilding and restoring your rental property as quickly as possible. You must ensure that your structure meets all building codes and is habitable and safe before your tenants return. Unfortunately, most policies cover only the cost to restore the structure to its pre-loss state, leaving the owner to cover the costs of any upgrades out of pocket.
   
• Lost rental income. Your tenants won’t be paying rent while repairs are underway, depriving you of much-needed income. An insurance policy that includes rental income protection can keep money coming in while your repairs are made, allowing you to make mortgage payments, cover unforeseen costs, and avoid foreclosure to the total loss of your property.

If you are not sure what damage is covered under your commercial fire policy, we can help. Simply fill out the form on this page today to contact the Voss Law Firm or order a free copy of our book, Commercial Property Owners Must Read This BEFORE Filing an Insurance Claim.