Tenants may not consider renters insurance a top priority in this current economy when every penny counts. Landlords may think that this insurance is only for the benefit of the renters, so if the renter balks at carrying this coverage, the rental property owner may not require it.
There are many reasons landlords or property managers should require renters to carry renters insurance. This insurance benefits both renters and landlords.
The lease agreement should have as one of its terms the requirement that renters provide proof of insurance at the time the lease is signed. If the renter does not have proof at that time, the landlord should not allow the renters to move in until proof is presented.
1. Reduces the possibility of lawsuits by the renter against the landlord.
If there is a break-in and a tenant’s property is stolen, the tenant may try and sue their landlord for the lost belongings. If the tenant’s personal property is stolen, damaged by fire, water damage, natural disaster, water overflow, and more, their losses are covered by their own insurance policy and there is no need for a lawsuit.
2. Protects landlords and tenants when renter’s negligence is responsible for property damage.
If the renter accidentally starts a fire or lets the water overflow in the bathtub damaging the carpet and the floor, for example, renters insurance will pay for this type of property damage. The landlord will be responsible for repairing the structural damage.
3. Loss of use.
If the property is damaged by a natural disaster to the extent the tenant must vacate, if tenants have renters insurance, the policy will pay for a hotel for a time while the property is repaired. This makes it more likely that tenants will wait for the damage to be fixed and move back in instead of vacating the property and finding a new place to live. Additionally, depending on the state where the property is located, the landlord may be required to pay the loss of use expenses if the renter does not have renters insurance.
4. Tenants have money available to pay for lost and damaged items.
If tenants had to replace their stolen or damaged property themselves without insurance coverage, they would have less money to pay their rent.
5. Helps you find responsible tenants.
Renters insurance is relatively inexpensive. It is generally around $20 a month. If a renter claims renters insurance is too expensive, you likely do not want to take a risk on that renter being able to pay the monthly rent.
6. Protects you and the renter from third-party liability.
If a tenant’s visitor trips on the renter's area rug, or gets bitten by the tenant’s dog, the renter's insurance will pay for medical bills and other damages suffered by the visitor.
7. Allows landlords to be pet-friendly.
Approximately 67 percent of all Americans own pets. If the tenant is required to have renters insurance that will cover liability and damages if the pet bites someone or if the pet causes property damage, relieving the landlord of liability, it may expand the pool of potential renters available for the property.
8. May prevent raises in landlord’s policy premiums.
For every claim submitted by a landlord, the premiums are generally raised. If tenants have renters insurance and submit claims to their own insurer, the number of claims submitted by the landlord will not increase which should also prevent the premiums from increasing.
9. Appeasing landlord’s insurer.
A landlord’s insurance company may offer lower premiums when a landlord requires tenants to have renter’s insurance.
10. Peace of Mind.
A landlord can have peace of mind about possible financial losses when tenants have renters insurance.
Landlords should discuss the requirement for renters insurance and the benefits to the tenants of having a policy in place prior to signing the lease agreement. Tenants should understand if they cancel the policy or let it lapse, they are in breach of contract which is grounds for eviction.