I see it every day when I talk with Real Estate investors about a recent claim and I ask them
"What about your tenant's HO-4 policy?"
Normal response "I don't make them buy one"
An HO-4 is a home insurance policy for a tenant
It covers their personal property and most important provides at least 100,000 of liability
This 100,000 liability protects against damage to your rental property or provides a layer of liability for slip, trip and fall claims that are so common
The policy also provides loss of use if the property is no longer safe to occupy
Here is an example of a recent claim
The tenant had some friends over and one of her guests tripped and hurt her ankle.
The tenant's guest hires a billboard attorney and the owner of the property receives a petition for pain and suffering, loss of income, loss of quality of life and mental anguish
These claims happen every day to Landlords and that is why you have liability insurance but what if you had an extra layer of liability provided by your tenant?
Some Landlords believe it is too expensive to ask their tenant's to buy one
How much does a HO-4 Tenant insurance policy cost?
The cost is as low as $10 a month
Where can a tenant purchase an HO-4 policy?
The easiest recommendation is "call your car insurance company"
Most car insurance companies offer HO-4 policies and provide a package policy discount when they have car and HO-4 policy together
How do you add this requirement into your lease?
Here is the lease HO-4 clause you can use or consult an attorney if you need a professional opinion
"The Tenant agrees to obtain renter's insurance HO-4 policy at their own expense and maintain the policy to the duration of the lease agreement. The Tenant acknowledges and agrees that in the event that they did not have in effect at the time of loss a renter's insurance HO-4 policy, then the Tenant shall be personally liable to all damages and losses that would normally be covered under a renter's insurance policy."
BENEFITS FOR THE TENANT TO BUY AN HO-4
It provides them coverage for their property.
Most tenants assume they are covered under the Landlord's policy
It gives them personal liability if an accident occurs and they cause personal injury or property damage
It provides loss of use if there is a claim and they can no longer reside in the property, they can receive payments to rent another property until the damage is repaired
It helps them save more on Car insurance when they buy an HO-4 policy from their car insurance company
BENEFITS FOR THE LANDLORD WHEN THEIR TENANT BUYS AN HO-4
In the event of claim you get an additional layer of liability usually 100,000 that will respond to a claim before your liability policy is needed
Recent claim example
A tenant falls asleep on the sofa with a burning candle
Unit catches fire and tenant escapes but since it was a two family dwelling, the other unit sustained smoke damage and the unit was uninhabitable
Over $42,000 of damage and as a requirement in the lease, the tenant had their own HO-4 policy
The tenant's policy repaired the damage to both units and provided loss of use reimbursement to the tenant next door and loss of rental income to owner of the property
Insurance and analysis to help you build a cash flow positive portfolio