As a landlord, you take steps to protect your investment. You make sure you protect yourself with good insurance policies, and take steps to minimize your liability. But there’s one additional step that you may want to consider having your tenants take as well –requiring them to have renters insurance.
Renters insurance is a policy that’s taken out by the tenants of the home. Just like a landlord’s policy protects your interest in case of damage or destruction, a renters’ policy will help to protect your tenant in case of the unexpected.
Six out of ten Americans renters are without renters insurance –according to a survey conducted by Insurance Quotes. Many renters are under the impression that their landlord’s insurance will cover them if something should go wrong. But this isn’t usually the case. Most of the time landlord insurance doesn’t extend to cover the tenants. Many tenants are also under the impression that renters insurance is prohibitively expensive –with a number of respondents to one survey estimating that it would cost over $1,000 a year.
But renters insurance is tremendously valuable, and it isn’t too expensive either. Most policies average around $187.00 a year –that’s less than $16.00 a month, a small price to pay for a great deal of coverage as well.
With this in mind, here’s a look at a few benefits of a renter insurance policy: for tenants and landlords alike. See why you’ll want to think about requiring –or at least strongly recommending renters insurance for your tenants.
First up, let’s take a look at some of the benefits of renters insurance for tenants and landlords alike. See why you’ll want to consider requiring, or at the very least recommending this insurance to your tenants.
In most states, landlords can require renters insurance as a condition of the lease, but there are some exceptions. In California, for example, landlords who have properties that are subsidized or those who rent to tenants who receive a housing subsidy may not require renters insurance.
Additionally, rent-controlled areas like New York and San Francisco may also put a dollar amount on the amount of insurance that a tenant is required to get.
In Oregon, tenants who earn 50% or less of the median area income or are in publicly subsidized housing cannot be required to obtain renters insurance.
As always, it’s a good idea to always check local and state laws before adding a clause that requires rental insurance to your lease.
If you do require renters insurance for your tenants, make sure you specify in the lease the amount of coverage, specify the minimum policy requirements –such as $10,000, $20,000 or more.
Tip: One way that renters could save on insurance is by bundling the policy with their car insurance. In some cases, this could result in a savings of around 5%. On an auto insurance policy, this savings could be sizable –making the cost of additional renters insurance almost negligible. Tenants may also be eligible for discounts if the property has added safety features like security systems or alarms. It’s a good idea to advise tenants to shop around and compare insurance quotes to find the best rates.
So should you require your tenants to have renters insurance? That depends! In some cases, it might be worth requiring your tenants to take out a policy –it can certainly help to reduce the amount of claims that you’d be responsible for, and can help to reduce your liabilities as well.
In most cases, requiring this insurance may not be a half-bad idea. In booming rental markets where there’s a wider tenant pool, requiring this insurance is unlikely to drive off would-be renters. However, in other markets –where there are fewer applicants and units rent for a lower price, requiring rental insurance may prove to be just another hurdle that would keep applicants away. At the end of the day it depends on your market, the property in question, and whether you feel that you can require your tenants to take out this policy. Likewise, in multifamily properties –such as apartments, where there’s a higher chance of a tenant’s mistake causing damage to a neighboring unit, renters insurance becomes even more important.
Whether you choose to require this insurance or not, at the very least you can make your tenants aware of the importance of this insurance. Highlighting the benefits, making sure they understand that the cost is low, and ensuring that they know that the landlord policy will not extend to provide coverage for their belongings can help to give your tenants the information they need to act accordingly –which at the end of the day, is the best thing you can do.