New landlords often are overwhelmed with the work that is involved in renting out a property. One of the most often overlooked issues is renter’s insurance. They make sure to buy landlord insurance to protect their property but they do not think about liability and damage to tenant’s belongings until they run into legal issues with tenants that are trying to sue them. This is when renters insurance comes into the picture! It covers the tenant’s belongings, covers against damage caused by tenants, and it usually also provides liability coverage for medical and legal costs if tenants/guests injure themselves on your property.
Many landlords and property managers have asked themselves if they can legally require tenants to buy renters insurance. The answer is YES! You just have to make sure that you include it as a stipulation in your rental contract for all your tenants and that you require proof of insurance for the lease term within several days of lease signing. You can even specify the minimum amount of coverage as long as it is reasonable.
Renters insurance provides benefits to both the tenant and the landlord. Here are some reasons why landlords and property managers should require renters insurance at lease signing:
1. It reduces financial liability
When tenants experience a loss due to a fire or maybe a burglary, landlord insurance does not cover the tenant’s belongings. Without renters insurance the tenant would have to pay to replace all their stuff and that might put a large financial burden on them which could result in them not being able to pay the rent on time. In addition, when a tenant moves out and leaves your property damaged, the security deposit may cover some of the expenses, but might not cover all of it. Renters insurance will cover the remainder of the expenses. Finally, the fewer claims landlords or property managers make on their own landlord insurance, the lower the premiums for this insurance will be!
2. It reduces legal and medical liability
Image you own a duplex that you are renting out to 2 families. A fire breaks out in one of the units due to tenant negligence but it spreads to the other unit and damages their personal property and injures one of the tenants in the other unit. Without renters insurance the tenants of the other unit would likely try to sue you, the landlord, for the medical bills and legal expenses. With both sets of tenants having renters insurance this would most likely not happen as their insurance would pay the bills.
3. It minimizes conflicts
Renters insurance gives both the tenant and the landlord peace of mind in case of a disaster. When a major loss occurs regardless of who is at fault, disputes about who is responsible for the costs and who should pay can be avoided by having insurance in place. Fewer arguments between landlord and tenant are beneficial to both parties and might keep the tenant from leaving their current rental and looking for a new place to live.
4. Quick insurance payouts reduce stress, uncertainty and cleanup time
Benefits under renters insurance are usually paid out immediately. Especially in case of flooding or fire when displaced tenants need money to cover temporary housing and associated expenses. This way the landlord or property owner can concentrate on damage repair and cleanup instead of on the loss the renter has incurred!
It is clear for many reasons that it is a good idea for landlords and property managers to require all their tenants to have renters insurance. It is the landlord’s responsibility to educate their prospective tenants about the benefits renters insurance will offer them. Many tenants might be apprehensive and believe that this insurance will be very costly and unnecessary but that is not true. Even for tenants the benefits clearly outweigh the costs. Besides the peace of mind it will bring them, renters insurance is very inexpensive and is easy to obtain. For about $200 a year a tenant can buy a policy that will cover up to $15,000 in property damage and up to $100,000 in liability coverage!