Waiver of Recourse: Do Tenants Still Need Insurance?

Quick answer

A waiver of recourse does not automatically mean that the tenant is insured against every risk.

In principle, a waiver of recourse may prevent the landlord or the landlord's insurer from recovering certain amounts from the tenant after an insured loss.

However, the clause does not necessarily insure the tenant's personal belongings or every type of liability towards third parties.

What is a waiver of recourse?

Imagine that a fire damages the apartment you rent and that you are legally liable for the damage.

Normally, after compensating the landlord, the landlord's insurer may in certain circumstances seek reimbursement from the person responsible for the loss.

When a valid waiver of recourse applies, the insurer agrees, within the limits of the policy, not to exercise that recourse against the tenant.

The key point is therefore:

a waiver of recourse mainly concerns the insurer's right to recover money from the tenant.

It is not automatically a complete insurance policy for the tenant.

Are your personal belongings insured?

Not necessarily.

Imagine that a fire damages:

• the walls of the apartment;
• your sofa;
• your television;
• your laptop;
• your clothes.

The waiver of recourse may have an effect on the landlord's claim regarding the building.

It does not automatically compensate you for your own belongings.

Your contents therefore need to be considered separately.

What about your neighbours?

This is another important point.

Suppose a water leak starts in your apartment and damages the apartment below.

The neighbour may have suffered a loss and your liability towards that third party may need to be examined.

Depending on the wording of the landlord's insurance policy, the waiver of recourse may not cover every consequence towards third parties.

You therefore need to know:

who benefits from the waiver, which risks are covered and what limits apply.

Questions to ask before relying on a waiver of recourse

Before deciding that you do not need your own insurance, ask:

1. Does the waiver of recourse apply to my specific rented home?
2. Which types of loss are covered?
3. Are claims from neighbours and other third parties covered?
4. Are my personal belongings insured?
5. Which exclusions apply?
6. Is there a maximum insured amount?
7. Am I contributing to the landlord's insurance premium?

Without clear answers to these questions, the words “waiver of recourse” alone are not enough to assess your actual level of protection.

Waiver of recourse or your own insurance?

These are not necessarily equivalent solutions.

Insurance taken out directly by the tenant can combine different types of protection, such as:

• tenant liability;
• contents insurance;
• private liability;
• legal assistance;
• other additional covers.

The correct comparison is therefore not simply:

“Which option is cheaper?”

It is:

“Which risks are actually covered in each option?”

Example

Your landlord's policy contains a waiver of recourse.

A fire damages the building and destroys your laptop, clothes and furniture.

The landlord may be protected for damage to the building and the insurer may waive recourse against you.

But if your own belongings are not insured, you may still have to bear their loss yourself.

Key takeaway

Waiver of recourse does not automatically equal full tenant insurance.

Before relying on it, check at least:

the building + your belongings + third parties + limits + exclusions.

Does your lease contain a waiver of recourse?

Compare the scope of that clause with the protections available through SWINZ.

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