06 Jan Here’s Why Renters’ Insurance is a Big Deal
You may be thinking, Renters’ insurance? Isn’t that a problem for the tenant to deal with?
While it is true that renters’ insurance is acquired by a tenant to cover personal belongings in the event of loss or damages, you, as the landlord, should still care about it. See, renters’ insurance not only saves the day in the event of damaged personal property – it also protects you from being held liable.
That’s right – renters’ insurance can serve as an important barrier to protect both the tenant and landlord in cases of damaged personal property. The catch is, if it’s not required – most tenants will opt out of it. At the end of the day, no tenant plans to utilize their renters’ insurance, so if one can skip out on the extra expense, they likely will. But the day a kitchen fire causes damage to the building and others’ property along with it, both you and your tenant will be wishing there was an insurance policy to swoop in. This is why it’s in your best interest, as the landlord, to require renters’ insurance – so both you and your tenant are covered.
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What is renters’ insurance?
Renters’ insurance is like any other form of coverage, a prepaid policy that covers a set limit in the event of accidents or disasters. Renters’ insurance covers damages to personal property, injury liabilities, losses, natural disasters, and even expenses to relocate if the unit is too damaged to continue living in.
Why should tenants have it?
If a tenant does not already have a rental policy, they may not be aware that your insurance does not cover their unit. A landlord’s Homeowners Policy exclusively covers the building’s structure – not the personal belongings or property of tenants. In the event of a fire in which fault was neither yours nor a tenant’s, the landlord’s policy will cover damages to the building – new flooring, wall repair, and so on. The renters’ insurance in this scenario would step in to cover any damages the tenant incurred – in fact, it would cover all property damages or losses up to the policy limit. Lastly, if the unit is severely damaged and requires major repair, some policies will even pay for hotel and moving fees for the tenant to vacate the unit. With that said, in order to have personal property protected in the event of a disaster, renters’ insurance is a must.
Renters’ insurance also protects a tenant from liability for any damages caused to other people’s property. Say a tenant accidentally starts a kitchen fire or leaves the water running and causes damages to a unit next door or below them. The tenant who started the fire would not be personally responsible for paying back the damages with their rental policy.
No tenant is excited to be introduced to an additional expense, but explaining the benefits and importance of renters’ insurance can help to lessen the blow. In many ways, a landlord requiring renters’ insurance for each tenant expresses responsibility and care for each tenant’s property, as well as the building. The positive side to renters’ insurance is that it is relatively inexpensive – averaging around $130 per year, for an average coverage limit of $100,000. It is a small price to pay for peace of mind, not to mention, having damages covered in the event of a disaster can be worth a pretty penny.
Why do landlords need it?
While tenants clearly benefit from having a renters’ insurance policy, there are certainly indirect benefits to the landlord as well. Ensuring each tenant has renters’ insurance offers you coverage against liability. If a tenant is liable for a personal injury at the property but doesn’t have liability insurance through their renter’s policy, the injured party is going to go after whoever does have insurance and, thereby, deep pockets. In other words, you.
Renters’ insurance also protects you in the event of theft or stolen property – since landlords hold the responsibility to provide a secure premise, without insurance, it’s possible that a tenant may try to sue you in response to theft. With a rental policy involved, the tenant is able to reach out to their insurance for coverage in response to the theft, thus keeping you safe from legal battle.
Renters’ insurance may sometimes cover damages when it comes to pets as well, which allows you the ability to accept and encourage tenants with furry friends to make themselves at home. Not to mention, tenants who are willing and able to take out renters’ insurance show a certain degree of dependability, in addition to passing credit and background checks in order to obtain the policy.
Requiring Renters’ Insurance in Practice
All landlords have the right to require renters’ insurance for tenants, as long as it is clearly expressed in writing. This should be included in the rental agreement and any applicable lease renewals, and if you meet with the tenant before move-in to discuss details, it’s a good idea to mention insurance then. Tenants typically provide proof of insurance prior to the lease start date. As a matter of our policies at Integrity Realty & Management, tenants are required to have a minimum of $100,000 in liability insurance by way of a renters insurance policy otherwise we automatically enroll (and charge) them for coverage under our group policy.
Insurance is not the most fabulous expense, but you never know it’s essential until it’s too late – it’s better to be safe than sorry. Protect yourself and your tenants by requiring renters’ insurance from the get-go, and you can both live in peace knowing your property is safe.
