Summary
Personal liability insurance won’t cover your risk as a rental property owner. Premises liability insurance protects real estate investors from claims related to injuries or damages that occur on their rental or investment properties. Real estate investors should carry at least $1MM per occurrence / $2MM aggregate in premises liability coverage to properly protect themselves and their business.
Understanding Liability Insurance
As a property owner, you have certain legal responsibilities to ensure the safety of visitors, both invited and uninvited. Liability insurance helps protect you financially if someone is injured or the property is damaged due to conditions on your premises or actions you’re legally responsible for. For real estate investors, understanding the difference between personal liability and premises liability insurance is key to ensuring the right coverage is in place.
What is Personal Liability Insurance?
Personal liability insurance protects individuals from claims resulting from injuries or damages they may cause to others. It is commonly included in homeowners insurance policies, and covers incidents like:
- A guest slipping on an icy driveway at your home
- Accidentally damaging someone else’s property
- Dog bites or other related injuries to another party caused by your pet
This coverage is intended to protect you, not your property or operations as a business owner, landlord, etc. It reflects your personal responsibility in causing harm.
What is Premises Liability Insurance?
On the other hand, premises liability insurance is tied to incidents that may occur at a specific location, typically a rental or investment property. It protects property owners from claims of injury on the premises due to unsafe conditions. Examples may include:
- A tenant or guest tripping over broken steps
- A delivery driver injured by falling on an icy driveway
- A public utility worker on the property injured due to poor lighting
This coverage is a must-have for landlords and real estate investors who are responsible for maintaining safe conditions on their properties.
Does Personal Liability Insurance Cover Rental Property Owners?
NO. A personal liability policy does not extend to your responsibilities as a rental property owner. For those exposures to be covered, you need a premises liability policy.
Does Premises Liability Insurance Cover Rental Property Owners?
YES. Premises Liability is designed to protect non-owner-occupied property owners. NREIG’s Premises Liability includes coverage for:
- Payment of bodily injury or property damage for which you are legally obliged to pay
- Medical expenses for the injured party
- Carbon monoxide pollution
- A sublimit for canine liability to protect you in case of damages caused by a dog on your property
- Defense costs such as counsel, court fees, and judgements
In addition to a Property and Liability coverage package, NREIG also offers liability-only coverage for real estate investors. We cannot stress enough the importance of carrying at least a premises liability policy for any property you own.
Key Differences
What Are the Differences Between Premises and Personal Liability?
| Personal Liability | Premises Liability | |
|---|---|---|
| Who/What Coverage Is Designed For | Owner-occupied homes (you reside in the home as your primary residence) | Non-owner-occupied properties (rentals, flips, vacant, under renovation, etc.) |
| Primary Purpose | Protects you and others who live in the home against personal negligence at your primary residence or off-premises incidents | Protects you as the property owner/landlord from claims of injury or damage arising out of the ownership, maintenance, or use of the property |
| Example of Coverage | A guest slips and falls at your personal residence | A tenant or guest is injured due to property conditions (broken railing, cracked walkway, loose deck boards, etc.) |
| Coverage Location | Limited to your personal residence and personal activities | Applies specifically to the insured and any additional insureds with liability exposure related to the rental, vacant, or renovation property |
| Tenant Injuries | Not covered – tenants are not considered guests | Covered for injuries to tenants or their guests caused by conditions at the property when owner liability is determined |
| Business Use Consideration | Homeowners policies exclude business pursuits, which can include renting your property for income | Recognizes rental activity as an exposure and provides appropriate liability coverage |
| Coverage Gaps for Investors | No protection for claims arising from rental activity or investment property ownership | Coverage tailored to non-owner-occupied risks |
| Best Suited For | Primary homeowners with no rental or investment activity on the premises | Landlords and real estate investors of tenant-occupied, vacant, renovation, or new construction properties |
Real-World Scenarios
Personal Liability Example
You accidentally knock over a neighbor’s expensive sculpture while visiting their home. Your personal liability insurance would cover the damage.
Premises Liability Example
A tenant falls down stairs due to a loose handrail at your rental property and sues you for negligence. Your premises liability insurance would respond.
Determining Coverage Needs
How Much Premises Liability Insurance Do I Need?
NREIG recommends maintaining premises liability limits at no less than $1 million per occurrence, $2 million aggregate, with higher limits available as well.
Real Estate Investors and Landlords NEED Premises Liability Coverage
Understanding the differences between personal and premises liability insurance will help you protect your investments properly and avoid costly out of pocket lawsuits. While personal liability insurance covers you as an individual, premises liability insurance is the only coverage suitable for your risks as an investment property owner.
