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Landlords have the crucial responsibility of keeping their tenants safe by properly maintaining their rental properties. But even if you do everything right, accidents can still happen that leave your property damaged or even uninhabitable.
If you're like most landlords, you already have a property insurance policy in place, but if you want the ultimate risk mitigation, your tenants should also have renters insurance. This type of insurance can provide essential peace of mind and financial protection for you and your tenants should an incident occur. Without it, you could be responsible for making expensive repairs to your property while holding the tenant responsible and putting them in financial trouble.
As a responsible landlord, you want to do what you can to provide sufficient living conditions for your leaseholders while minimizing any sort of risk. Along with physically maintaining the property, you also need to make sure you rent out to responsible tenants while having an added layer of protection, like insurance.
While landlords typically have property insurance that covers damage to the building, their rentees can have renters insurance, which offers coverage for personal belongings and even protection for the unit they're renting. Let's look at an example.
Say one of your tenants accidentally causes a fire in their unit. This fire damages their unit, their property, and even some of the neighboring unit's property. As a landlord, your property insurance will likely cover damage to the building caused by the fire, but it won't offer any coverage for your tenant's damaged belongings or their neighbor's.
This is where renters insurance comes in. When the leaseholder has sufficient renters insurance, their policy will help pay for the damage to their belongings and their neighbor's belongings. Not only does this provide essential financial protection for the tenant, but it also helps ease your financial burden.
The most obvious advantage of this type of insurance is the financial protection it offers, but you and your rentees can enjoy many other benefits, like:
Renters insurance and risk mitigation have a crucial and clear relationship, but what can you expect it to cover? Like most types of insurance, renters insurance can have different coverage levels and limits depending on the company and specific policy. However, the typical policy covers three main areas: liability, personal property, and additional living expenses.
We've already mentioned how renters insurance can help offer liability protection if someone becomes injured on your property in a tenant's unit, but liability protection covers a much wider range of incidents. Let's revisit the accidental fire example.
If a rentee accidentally starts a fire in their unit, which causes damage to their property and their neighbor's, the neighboring tenant could sue the one responsible for starting the fire. A lawsuit like this could cause significant financial strain on the tenant and even impact their ability to afford rent, but a renters insurance policy can help cover these costs.
Accidents like this happen more often than you think. In fact, the National Fire Prevention Association states that around 100,000 fires occur on rental properties every year in the U.S.
Renters insurance covers more than fire-related scenarios. If someone breaks into your tenant's unit and steals their property, their insurance will help cover the costs of the stolen items. This coverage often extends to their property outside of the actual unit, such as if someone breaks into their car and steals their phone.
Personal property protection also helps cover water-damaged items and more, which can give your tenant ultimate peace of mind should an accident occur and damage their possessions.
If a fire, flood, or other incident causes so much damage to the property that it makes it uninhabitable, renters insurance will help pay for a tenant's additional and temporary living expenses, such as hotel costs. If they don't have a policy in place, you could have to include these costs in your business's operating expenses.
According to CNET, despite the numerous benefits and safety measures of renters insurance, only around 40% of rentees have a policy in place, which begs the question: can landlords require it? In most cases, you can have renters insurance as a requirement for potential tenants, but some states have a few exceptions for this.
For example, Oregon and California have laws in place that prevent landlords from requiring renters insurance for certain types of properties, such as government-subsidized housing. However, you also don't have any legal obligations to require tenants to maintain renters insurance.
If you decide to make renters insurance a requirement, you need to keep in mind that this is an additional expense for the tenant. As such, you want to include this additional price in the total rental listing cost.
If you decide to embrace the risk mitigation benefits of renters insurance by making it a requirement for your tenants, you need to think about what to do if rentees don't have the right insurance. First, you need to make sure your lease agreement clearly states the requirements for renters insurance.
When a tenant fails to satisfy the renters insurance requirements stated in the lease agreement, you can pursue a few different legal courses. For example, you could try to rectify the situation by giving the tenant a chance to enroll in a sufficient policy. However, if they refuse or the situation is serious enough, you could have the legal right to evict them on the grounds of lease agreement non-compliance.
In many cases, tenants hesitate to purchase renters insurance because of the costs, which tend to be around $143 per year, according to the Insurance Information Institute. You can encourage compliance from renters by explaining the benefits of renters insurance and the essential financial and liability protection it provides.
Requiring renters insurance is one thing, but you also need to determine how much is necessary to maximize risk reduction. The amount of coverage necessary can vary depending on a lot of different factors, so you need to consider the following when figuring out how much is enough.
In the U.S., a typical renters insurance policy with $15,000 worth of personal property coverage costs around $157 a year, according to Forbes, making it an affordable option for tenants. However, some properties require up to $100,000 or even $300,000 worth of coverage, so it helps to see what other similar rental properties require from tenants.
Not all tenants have the same amount of personal belongings, so they should find policies that offer enough coverage for their personal belongings and potential liability. For instance, if a tenant has around $25,000 worth of assets, they should find a policy that offers $25,000 worth of personal property insurance. Meanwhile, liability coverage should be about $100,000 in most cases.
If a tenant has items of higher value, such as jewelry or artwork, they may need additional coverage to protect their finances should these items become damaged or stolen.
Landlords have a lot of responsibilities when renting out and maintaining their properties. Renters insurance is a great way to enhance risk management while giving tenants greater peace of mind.
Whether you're looking for the right renters insurance for your tenants or property insurance for yourself, it's important to know where to look, and it helps to have professional advice. At Insurdinary, our insurance experts know how crucial it is to have renters insurance that's affordable and offers the right amount of coverage for minimizing risks. We also know how challenging it can be to narrow down your options and find the right policy.
We work with the top insurance providers in the U.S. to provide you with multiple quotes from top-rated plans that offer the coverage and premiums you're looking for. If you're ready to embrace the risk mitigation benefits of renters insurance, contact us to get a quote today.