Should you, as a landlord or manager of rental property, insist that your tenants carry renters’ insurance? Does the law even allow for this to be a necessity? Which guidelines should my plan incorporate? How can I ensure compliance with this policy, and what are the benefits to both my business and my tenant?
There are various benefits of renters insurance. Stolen or damaged personal belongings will have devastating results for both parties when landlords do not require renters insurance, including lawsuits, broken relationships, lost income, and damaged personal property.
Let’s talk about why it’s crucial that your tenants carry rental insurance to legally protect your investment and keep your business running smoothly, giving you peace of mind.
The Definition of Tenant Insurance
Tenants’ or renters’ insurance is insurance purchased by tenants to protect their personal property and legal rights in the event of an accident or other covered loss not covered by the landlord’s insurance.
There are three main types of protection offered by renters’ insurance:
- Protection from risk
- Protection of valuables
- Protect your tenant’s belongings in the event of damage, destruction, or theft with personal property coverage.
Many renters today, however, don’t see the need for renters insurance, if Forbes is to be believed. Too many tenants either fail to fully appreciate the value of their belongings or wrongly assume that their landlord will cover any repairs.
The following kinds of possessions are covered by personal property insurance:
- Devices for watching television, including new and improved models
- Mobile Devices, Tablets, and Consoles
- Plant Life; Both Tree- and Shrub-Based
However, not all policies that insure one’s possessions are created equal. Educating your tenants on what is and what is not included in their lease is a top priority for any property manager. Prior to making a final decision, they should consult with their insurance company on what their insurance covers, the contents of insurance, and the cost of replacing items if broken or stolen.
Protecting You From Legal Repercussions With Liability Insurance
Insurance for a rental property also includes protection against legal responsibility. If your tenant causes harm to another person or their property, this insurance will help cover the costs.
A visitor to your tenant’s property trips over the rug on the front step, for instance. They will be found at fault if their guest decides to file a lawsuit. Dirt2tidy
The following are not protected by standard liability insurance:
Icy walkways, dead trees, neglected upkeep, potholes, and other hazards can all lead to serious accidents that the property owner should be responsible for fixing. Vandalism and property damage or pay rent arrears.
If a tenant incurs any additional costs for maintaining their standard of living after a covered loss, those costs will be covered by the additional living expenses provision.
Among those expenses are:
- Hotel Costs
- Short-term lodgings
- Expenses associated with getting to and from a short-term rental, a permanent residence, a place of employment, or any other destination.
- Removal Expenses
- Feasts at a Restaurant
- Boarding Services for Pets
- Some examples of the sorts of things that fall under the heading of “extra living expenses” are provided above.
How Renters’ Insurance Benefits Landlords
As can be seen, landlords can rest easier knowing that their tenants are protected by law from financial loss thanks to insurance requirements.
Here are some of the advantages:
- Creates separation between homeowners’ coverage and tenant coverage
- Mitigates potential involvement in legal matters
- Helps avoid landlord/tenant conflict
When renting a home or apartment, tenants are not required by law to carry renters’ insurance. Nonetheless, as a landlord, it is your responsibility to advise your tenants to speak with a qualified insurance agent or company as part of their lease agreement.
Do Tenants Need to Carry Renter’s Insurance?
Tenants are not required by law to carry renters’ insurance. However, because of the mutual benefits it provides to landlords and tenants, your landlord may insist on it before renting to you.
A clause in the lease reading “Lessee is required to provide proof of renters insurance within 14 days of the lease start date” may be included if the landlord insists on renters insurance.
Landlords typically mandate renters’ insurance as a means of mitigating their own risk, but tenants can benefit from it as well by protecting their belongings and lowering their overall risk exposure. It’s a measure that can help keep the rental unit in pristine condition by encouraging tenants and landlords to treat the space with care.
Consult an insurance agent with any questions or concerns you may have if you’re on the fence about purchasing renters insurance.