Most landlords know that they need to keep their apartment buildings, houses or condos safe from disasters with an insurance policy. Unfortunately, many tenants wrongly assume that a landlord’s policy covers their belongings or liability. Many renters, thinking they’re protected by their landlord’s policy, choose not to purchase a renters insurance policy.
Unfortunately, this lack of knowledge can lead to confusion or even legal disputes between landlords and renters in the case of damaged belongings or accidents. Requiring tenants to carry renters insurance can help protect both the tenants and the landlord. In this article, we’ll look at some of the reasons why landlords should require their tenants to purchase renters insurance.
What is Renters Insurance?
Most landlords understand the basic concept of renters insurance: a tenant pays for a separate insurance policy that protects their belongings in an apartment or building. Often unknown, however, are the other benefits of renters insurance. In addition to protecting a tenant’s belongings, it may also provide liability protection and coverage for some tenant expenses in the event the rental becomes uninhabitable.
Covers Tenants’ Personal Property
The most basic benefit of renters insurance is to provide coverage to replace or repair a tenant’s belongings in the event of a covered loss which would include things like a theft or fire. This coverage is a great leverage point for a landlord to require renters insurance. In a worst-case scenario, a tenant who has lost some of their belongings due to an accident in the rental may try to take action against their landlord to pay for the replacement of the items. This can quickly become a drawn-out battle between the two as to who is responsible. By requiring a renters policy, the need for the tenant to seek compensation for their losses from the landlord is reduced. Instead, the tenant’s insurance policy should pay to replace or repair damaged items for a covered loss.
Another benefit to personal property coverage is the likelihood that a tenant will continue to pay rent on time and in full. For example, if a student loses their bike, computer and textbooks in a theft, they are likely to need these things replaced as soon as possible. Without renters insurance, they will have to pay out of pocket for replacements. This might leave them strapped for cash and seeking an extension to their monthly rent or only able to pay a partial amount. With renters insurance, they will probably only pay a deductible for their replacement items and have the money to pay the landlord on time.
Protects from Potential Lawsuits
One of the biggest reasons for landlords to require that tenants purchase renters insurance is to reduce their exposure to lawsuits. When a renter doesn’t have a renters policy, the landlord may be sought out in the event of an accident or loss. If a tenant has guests over and one of the guests is severely injured, the injured guest may seek compensation for their medical bills. Depending on the situation, the injured party might pursue the landlord for the accident.
Tenants with renters insurance usually have liability coverage included in their policies. The renters policy would likely pay for the injured guest’s bills if the renter is found liable for the loss which means the landlord may not have to be involved at all. In addition, this can help a landlord save on insurance premiums. If a tenant does not have renters insurance, the injured person is more likely to sue the landlord seeking compensation. The landlord’s insurance may cover the injury or damages, but only if they are found to be liable for the loss. This can impact the landlord’s insurance premiums which may increase due to this claim.
Pays Temporary Tenant Expenses if Disaster Strikes
Unfortunately, accidents such as fires or other natural disasters can happen at any time. If an apartment building were to be damaged in a disaster and deemed uninhabitable, many landlords feel responsible to help their tenants secure a temporary home. In fact, it may even be required based on local laws. For landlords of multiple apartment or condos within the same building, this expense could quickly add up.
Requiring renters to carry a renters insurance policy greatly reduces the likelihood of a landlord having to pay for relocation expenses if something happens to their building. On the unlucky chance that a building becomes unlivable, renters insurance usually pays for some of the tenant's additional living expenses. This might include hotel stays or relocation costs.
Affordable for Tenants
Some landlords worry that including a requirement for renters insurance may raise questions about price from potential tenants. Luckily, renters insurance is one of the most affordable policies available. In 2016, the average annual premium for renters insurance in California was $200, or a little over $16 a month. Additionally, some rental properties may provide tenants with certain renters insurance related discounts.
Easy to Include in a Lease
The easiest way for landlords to require that tenants carry renters insurance is to include it in the lease. Simply adding a provision to the lease agreement that a renter will maintain a renters insurance policy helps to protect both parties. Some landlords can require that the tenant shows proof of insurance prior to moving in. This builds a strong, positive collaborative relationship between landlord and tenant, as they both know they can work with one another.
Helps Filter Tenants
Requiring renters insurance from tenants may also help filter out less than ideal tenants, such as those who pay late or don’t maintain the rental property. Landlords should be up front in their rental listings that they require renters insurance. This helps potential renters see that the rental is only available to serious renters. When an applicant accepts the renters insurance requirement, it generally shows that they are compliant and will likely make a good tenant. Someone who resists the landlord’s requirement for renters insurance might also resist other policies.
Protect Tenants by Requiring Renters Insurance
In the unfortunate event that a covered loss does occur, both a landlord and their tenant will probably be better off if a renters insurance policy is in place. Not only will it protect both parties from the cost of replacing belongings or paying for losses, but their relationship is likely to be more productive. Both landlords and tenants can benefit from a landlord requiring all renters to purchase and maintain a renters insurance policy.