Many landlords and property managers are familiar with landlords’ insurance and its importance, but few give any thought to renters’ insurance. But the fact of the matter is, renters’ insurance is not only beneficial to the tenants, but it also adds an extra layer of protection to the landlords and managers.
You could add a renters’ insurance requirement as a term in the new lease, or lease renewal, but before you do, it’s best to check your state laws and see if you can add it as a mandatory clause.
There are many ways in which renters’ insurance is beneficial to the landlords, so let’s take a closer look.
According to Clever Real Estate, renters insurance is a type of property insurance that provide’s coverage for the policyholder’s liabililities and belonging. Sometimes it also covers the policyholder’s living expenses.
Protection from Lawsuits
Many tenants believe their possessions are protected by the landlords’ insurance and that it also covers medical expenses in case of an accident. This can make it likely and easy for tenants to bring the case to court if anything should happen.
However, it’s actually the renters insurance that covers damages to personal possessions and medical bills. Without renters’ insurance, tenants may claim that landlords share responsibility for the damages, and this can result in costly court battles.
Renters’ insurance is your protection against this. Standard policies usually include coverage for fires, lightning, vandalism, theft, and riots, among other things, and tenants will have no reason to take you to court over such damages.
However, keep in mind that, in case of theft and burglary, you should have adequate security measures and provide the insurance company with information about them. Without this information, the insurance company might not reimburse your tenants.
Deductibles and Insurance Premiums
With your landlords’ insurance policy, your insurance company will cover the costs in case of a fire, for example. However, you’re still responsible for paying the deductibles, and that can mean you’d potentially be expected to spend quite a large amount of money.
Having your tenants get the renters insurance will help you cover your landlords’ insurance deductible, and it will be easier for all of you to deal, at least financially, with such an unfortunate event.
On the other hand, if there are too many insurance claims, your landlords’ insurance premiums can increase substantially, or even be canceled. When the renters’ insurance covers the damages, completely or partly, you can lower your chances of increasing your own insurance cost.
Relocation and Cleanup
Basic renters’ insurance includes coverage for liability. This means that the liability is transferred to the tenant in case of a fire caused by them, for example, or for personal injury on the premises. This means you are not required to submit a claim to your carrier and cover the costs of the deductibles.
Depending on the state where you live, you might be required by law to cover the expenses of the relocation of the tenants in case of a disaster. So, you would be negotiating lodging and other necessities on the behalf of your tenants while you’re dealing with your property damage.
It’s not uncommon for tenants to move out entirely after property damage, leaving their damaged possessions behind, and thus leaving it up to the landlords to cover the expenses of cleanup and disposal. While the security deposit might help reduce the cost of some of the repairs, it likely wouldn’t cover all the expenses.
These situations are where renters’ insurance comes in very handy for the landlords and property managers. Renters’ insurance policies cover the expenses of relocation, and some even cover the expenses of cleanup and the removal of damaged property.
Responsible Tenants and Responsible Landlords
About 65% of households are headed by people who are renting, and it’s difficult to know how responsible those renters are. Requiring renters’ insurance is your easiest way to find responsible and reliable tenants.
Renters’ insurance is usually very affordable, commonly costing less than $20 a month, so with the exception of very financially unstable tenants, this is not a big deal for most. If your rental applicant complains about the insurance requirement, it might be a sign that they cannot afford to pay rent regularly.
Responsible renters will see the benefits of this insurance, and it will show you they care about their home and well-being.
The same goes for the landlords. Asking your tenants to get the renters’ insurance will show them you are a responsible landlord. You can rest easy knowing all your tenants are safe, and that your tenants will be properly covered in case something unpredictable happens. This creates trust between landlords and tenants, and it’s a win-win situation for all.
Renters’ insurance provides a piece of mind for both tenants and landlords and requiring it will be beneficial for everyone involved. So, it’s in your best interest to encourage your tenants to apply for it.