Tenant Vetting: How Landlord Insurance Can Be Affected by Tenant Screening

The tenant screening process can significantly impact landlord insurance. Tenant screening is a crucial step in the rental process that helps landlords assess potential tenants’ suitability and reliability before entering into a lease agreement. Insurance companies consider various factors when underwriting landlord insurance policies, and tenant screening plays a vital role in determining the risk associated with insuring a rental property.  

Ways Tenant Screening Impacts Landlord Insurance 
The following are some ways in which landlord insurance can be affected by tenant screening: 

• Coverage availability—Insurance companies evaluate the risk of insuring a particular property. They consider factors such as the property’s location and condition and the potential tenants who will occupy it. A thorough tenant screening process helps identify applicants with a history of responsible tenancy, good credit scores, stable employment and positive rental references. Insurance companies are more likely to provide better coverage options and terms for properties with tenants who have a lower risk of causing damage or defaulting on rent.
• Lower premiums—Tenant screening can help prevent losses for the landlord and the insurance company. Selecting reliable and responsible tenants can reduce the likelihood of property damage, illegal activities and other issues that might lead to insurance claims. Insurance providers may offer lower premiums to landlords who commit to proper tenant screening.
• Tenant liability coverage—Some landlord insurance policies include tenant liability coverage. This policy will protect the landlord in case a tenant causes damage to the property. Tenant screening helps reduce the risk of such incidents and may positively impact cost and coverage availability.   
• Fair housing compliance—While tenant screening is essential, landlords must conduct it in compliance with fair housing laws. Discriminatory practices can lead to legal trouble and potential insurance complications. Insurance companies may require evidence that landlords conduct nondiscriminatory tenant screenings to offer full coverage.
• Tenant turnover—Insurance providers may also consider the length of time a property is vacant when underwriting a policy. Tenant screening plays a role here as well, as finding reliable tenants promptly reduces the vacancy risk and, in turn, may lead to more favorable insurance terms.
• Lower deductibles—Insurers may offer lower deductibles to a landlord less likely to experience significant losses due to tenant-related issues.
• Claims processing—If a claim is filed, the insurance provider may investigate the circumstances of the claim. Thorough tenant vetting can demonstrate a landlord’s due diligence in tenant selection, potentially leading to a smoother and faster claims resolution. 

This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.