Many landlords ponder this question. They may assume that tenants will automatically purchase renter’s insurance because, well, who wouldn’t want to be protected? Unfortunately, without it being mandatory, many renters fail to do so.
Renter’s insurance helps protect a tenant’s belongings due to things such as theft, fire, natural disaster, and liability for injuries. If something happens while the tenants are living on your property and something happens, they will be taken care of. Sure, you have property insurance on your rentals, but why would you file a claim and raise your rates when the tenant can use their own?
Can you require your tenant to have a renter’s insurance policy during the length of your lease? Absolutely. This requirement, however, will need to be spelled out and clearly stated within the terms of the lease.
So, what are the benefits of requiring renters insurance in your lease? As a landlord, you may appreciate these –
Renter’s insurance reduces the chances of a lawsuit. If someone is visiting your tenant and gets injured, he or she may decide to file a lawsuit to pay for medical expenses and such. This could fall back on you. While it is not overly common, it is possible. If your tenants have renter’s insurance, you can rest easy knowing that if something happens, their insurance will cover the claim.
Renter’s insurance reduces your responsibility. Whenever something catastrophic happens, such as a disaster or fire, tenants often feel displaced and will look to their landlord for alternative housing solutions. You being the good person you are may feel a bit responsible to provide that in some form. Renter’s insurance will take care of your tenants so you don’t feel obligated to.
Renter’s insurance will pay your deductible. Should your property get damaged due to fire, flood, or natural disaster situations, your insurance policy will help you renovate or re-built. That’s why you have it. But, there is always that large deductible hanging over your head. If your renters have their own insurance, then it should cover your deductible.
Please note that these are just a couple of the benefits that renter’s insurance will provide – so it is definitely something to consider.
Requiring your tenant to have renter’s insurance is not out of the ordinary. Unless your tenant is extremely strapped for cash (which should be a red flag from the get-go), requiring renter’s insurance should not be a burden. It generally costs around $20.00 per month and can even be bundled with other things, such as car insurance.
Relax and make this part of your lease agreement. When an incident arises, you will be glad you did.
