Renters insurance: Additionally insured or additional insurer?

[Robert Cummings]

I am currently re-writing my lease and rental agreements.  One of the additions is renters will be required to have renters insurance.  Now do I have them list me as Additionally Insured or just Additional Interest?   I have done some research:  

Definitions: 

Additional interest - The designation is designed to ensure that a third party (the property owner in this scenario) is notified should the policy cancel or non-renew. This endorsement does not convey any coverage to the additional interest nor cost the tenant any additional premium.

Additional Insured -  a party listed on an insurance policy that has some type of liability interest in the property. The “Additional Insured” has absolutely no right or authority to make any policy changes or to cancel the policy. Also, contrary to popular belief, an “Additional Insured” is ONLY afforded liability protection under the liability portion of the policy and there is no coverage whatsoever for physical losses resulting from such things as vandalism, theft, fire, wind and hail, and so on.

A PM trainer by the name of Judy Cook had some interesting points: Yet it seemed to be more beneficial for the PM company to be listed as Additionally Insured so to help focus on accomplishing the task of defending against a tenant suit.

http://judycook.biz/additional-insured-vs-addition...

So additionally insured seems great for commercial property, commercial business, endeavors but could be confusing for Landlords.  Which is why I am turning to BP members.  I haven't found any really great definitions for additionally insured, just examples.  For instance it means if the tenant is at fault for a fire (let's assume a fire) then the renters liability would cover the renters belongings but the check would be in the name of the renter and the landlord.  If that is the only benefit what benefit is that to me?

Let me know what you do as a landlord and/or property investor.  Oh, and yes I did read BP member DREW SYGIT article 3 Common Mistakes Landlords Make ... and Trey Dulling 6 tips to protect newbie Landlords.  Both good articles but not enough info on insurance, that was not a dig as the articles were not specifically written to explain the differences between additionally insured and additional interest.

[Mark Ainley]

We do additionally insured. As a property owner and business owner my largest fears surround defending ourselves legally.  The property will be covered by my coverage.  

[Robert Cummings]

Originally posted by @Mark Ainley:

"We do additionally insured."  Hello Mark.  Are you considered a PM, Landlord or RE Investor?

[Robert Cummings]

Sorry Mark, I see you are a Real Estate investor. I should have read the info before asking. Since you are a company you probably have an LLC or at least you operate under a business name?

[Joe Cummings]

It's my understanding that "additional interest" really just means you get something like an "Accord Certificate"

https://www.acord.org/standards/forms/Documents/ACORDCertificatesFAQ_201004.pdf

[Mark Ainley]

@Robert Cummings

We are investors but also have a property management firm that manages our investments. LLC or personal name the "additional insured" offers the best case for the landlord/owner/manager.

[Robert Cummings]

Originally posted by @Joe Cummings:

It's my understanding that "additional interest" really just means you get something like an "Accord Certificate"

https://www.acord.org/standards/forms/Documents/ACORDCertificatesFAQ_201004.pdf

 Hi Joe: I think it means only you get notified if the policy lapses or the tenant cancels later.  

[Robert Cummings]

Originally posted by @Mark Ainley:

@Robert Cummings

 We are investors ....

OK, thanks Mark.  I don't know if it mattered or not I just wanted to ask so I could gather all the details. 

[Joe Cummings]

Originally posted by @Robert Cummings:

Originally posted by @Joe Cummings:

It's my understanding that "additional interest" really just means you get something like an "Accord Certificate"

https://www.acord.org/standards/forms/Documents/ACORDCertificatesFAQ_201004.pdf

 Hi Joe: I think it means only you get notified if the policy lapses or the tenant cancels later.  

 Yeah, that is what the "Acord Forms" I deal with are all about. They are just a notification system for a third party that your insurance is current.

[Account Closed]

I am not required to have renter's insurance, but I always carry it, so I would have no problem if a landlord required it of me.  But, if a landlord required insurance and then said they need to be named as .....such and such, I'd call my insurance company up and ask them what that means.

If they told me it meant that the landlord would have his/her/corporation's name on my check, if I get an insurance check, I would not be willing to do that.

Would be happy to give you proof of my coverage, and would be fine with you receiving a copy of my policy.  But that check would be mine.  I'd never want to have to deal with getting your signature on my check and fighting with you over who gets what.

I don't care if your insurance company fights with my insurance company over who gets what between them.  But, I would never sign off on having to deal with any of that nonsense.

So, you might want to consider whether or not a tenant would agree to whatever it is you're proposing.  For what it's worth.

[Joe Cummings]

The "additional named insured" thing costs more for whoever is purchasing the policy. As a landlord you would be better protected in theory, but for exactly what, I forget.

[Robert Cummings]

Hello @Account Closed

 Yes I have considered that.  I know from the BP forums that some have "additionally insured" so it is happening out there.  I also know I wouldn't want my name on the tenants insurance reimbursement.  What I don't know is if that is how things would happen.  It is a common thing business to business and it seems to be common in some areas of the country.  What would be really helpful is if a BP'er who is listed as additionally insured on a tenants policy and there was a claim.  Then we could get the scoop of how this thing really works. 

[Robert Cummings]

Ok, @Joe Cummings

 I didn't know what the term"accord forms" meant.  So when you say it will cost the tenant more this is something you have first hand knowledge of because you work in the business?  BTW, what size bike is that?  

[Account Closed]

Originally posted by @Robert Cummings:

Hello @Account Closed

 Yes I have considered that.  I know from the BP forums that some have "additionally insured" so it is happening out there.  I also know I wouldn't want my name on the tenants insurance reimbursement.  What I don't know is if that is how things would happen.  It is a common thing business to business and it seems to be common in some areas of the country.  What would be really helpful is if a BP'er who is listed as additionally insured on a tenants policy and there was a claim.  Then we could get the scoop of how this thing really works. 

 Yes, I'm curious now myself.  

I think as a landlord requiring insurance, I'd also require the tenants to have a policy that includes loss of use/displacement coverage.  It's really cheap, but in the event they have to move out of the unit, this insurance pays for them to stay in a hotel, etc.  Mine is up to $4000 or so that they'll cover, if I have to move out of my apartment because of flooding pipes, etc.  Even with this additional insurance, my policy is still under $20/month.  And it seems like this is usually the issue with tenants needing renter's insurance - where they want to go after the landlord to pay for their hotel room. 

So, you might want to consider specifically requiring this coverage in your tenants' policies.

[Robert Cummings]

@Account Closed

 I learn something new all the time, at least I try to.  I thought that type of coverage was standard.  I will talk with a company that specializes in renters insurance and see what type policy is typical.  I'll post what I learn at that time.  Thanks Sue Kelly, the more i learn the more I need to learn. 

[Joe Cummings]

82 FXR 80 Cubic Inch.

I have to supply customers with Acord Forms all the time. It is proof to them that I am carrying insurance and that it's current. If my policy lapses for whatever reason, they will get notification (In theory, in reality it doesn't always happen).

In my world (contracting) calling my insurance company and having an Acord Form sent out is free.

On the other hand, Putting someone on my policy as "Additional Named Insured" costs me extra money. How much more I forget. I know I dealt with someone who was requesting to be "Additional Named Insured" and I wasn't happy about it for some reason. I honestly can't remember why though. 

[Robert Cummings]

I set out to get these questions answered ..

1. Which is better, additionally insured or additional interest, for the landlord.

2. Would there be a conflict of interest if the tenant starts a fire.

Subrogation allows my insurance to go after the tenant in an at fault situation. Which means they would go after the renters insurance company, and I am on the renters insurance policy.  

 I have been calling insurance companies that are both national and regional.  I also contacted the insurance commissioners office in Washington State.   There are many insurers that will not do additionally insured coverage.  I don't know if I can list the names of the companies I contacted regarding who will or won't.  Moderator please inform me.

@Joe Cummings  is correct it does cost a little more depending on the insuring company.  But the question is which is better?  Additionally insured is better for the landlord, though it does mean if your tenant has a small claim and they receive a check your name will be on the check. But there is no conflict for your insurance company  Additional interest is more common, would be easier for the tenant to get coverage (faster also).  Yet the only good thing about it is that it notifies the landlord if the policy lapses.  But not always and not always soon enough. 

[Chris T.]

I was researching this as well and came across your posts. I know it's a little old, but it seems from other insurance agents and posts on BP, the consensus is "additional interest" seems better for the landlord. Furthermore, Blackstone's Invitation Homes, has on their website under "qualification requirements" 

"12. Renter’s Insurance Requirement – Effective November 12, 2015, in Central Florida/Orlando and Tampa Bay, FL and effective December 10, 2015 in Jacksonville and Miami FL, January 22, 2016 in Atlanta, Charlotte, California and Las Vegas, and January 29, 2016 in Seattle, Phoenix, Chicago and Minneapolis all residents are required to carry a

minimum of $100,000 of Personal Liability Insurance coverage with Landlord identified as a “Party of Interest” or “Interested Party” (or similar language as may be available) on the renter’s liability insurance policy."

 http://www.invitationhomes.com/qualification-requi...

Another BP member mentioned this link

https://www.effectivecoverage.com/800/additional-i...

[Account Closed]

@Robert Cummings Additional interest is exactly what you think it means. It gives you notice if the policy is canceled. It is common among mortgage holders and anyone else requiring coverage. Being listed as an additional insured on the policy makes you an insured under the tenants liability insurance. IIn most states as long as the tenant is 1% liable for the claim his insurance will take care of the defense costs and pay claims up to his limit. For example, if a tenants dog bites a visitor and that visitor sues both him and you (or just you) the tenants liability insurance will provide defense for both you and pay settlements up to his limits. 

Keep in mind that if a tenant is liable for damage to your property his liability insurance will pay you for those damages regardless of additional insured status. In that case you are the claimant and he is the defendant.

If you were not named as an additional insured on the tenants policy your insurance would have to provide defense costs and the courts would go through a drawn out battle to determine the percentage of liability you both had (say tenant 80% and you 20%). You would then be on the hook for that amount. 

As the landlord you are going to be named in every suit caused by a tenant regardless of fault since you are perceived to have the deeper pockets. For example, if a tenant murders his neighbor you will likely be named in the suit for negligent screening of tenants.  Apartments notoriously have tons of frivolous claims and an important part of your risk management plan should be requiring a monitoring renters insurance of your tenants. Keep in mind the premium for renters insurance is less than $150 a year so it is not an unreasonable requirement.

[Thomas Richter]

You guys have to be real careful differentiating between Landlord liability insurance and renter liability insurance. It seems to be used interchangeably here. And who is asking to be named as what. The scenario is not one-size-fits-all. 

As a PM Company you'd want to be named as Additionally Insured on the Landlord's Liability Insurance and on the Renter's Insurance. But as the Landlord you would want to be named as Interested Party on a renter's insurance, so you can sue the tenant for damages on your property (if you are insured on the same policy, you can't file a claim against yourself).