As a landlord, you may wonder what renters insurance covers, and if you should require tenants to purchase it. You may also wonder if it’s legal, how they will benefit from it, and/or how to enforce it.

Renters insurance covers the renter’s personal possessions and their liability. It is needed in addition to your normal landlord liability insurance. A mundane example is their groceries. If the refrigerator breaks down, you can bet they just bought a huge amount of steaks, right? Well, the refrigerator is your responsibility, but the contents have always been on the tenant. The conversation goes better if they have insurance.

Not making insurance mandatory can result in major consequences such as irreparable damages, unwanted lawsuits, financial ruin, and so on. Making it a requirement is a smart business practice that protects both you and your tenants from potential legal and financial risks, can attract responsible tenants, and ensures that coverage exists when the least expected happens.

Four Things Renters Insurance Covers

1. Personal Property

Renters insurance provides coverage for replacing personal possessions like furniture, bicycles, clothing, groceries, computers, and televisions, for theft or damage events. The landlord’s insurance policy covers the building. 

2. Liability 

The liability portion of a renters insurance policy offers some liability coverage, depending on fault. Renters liability insurance should cover damage caused accidentally to others’ property. In the case of a dog bite, for example, a renters policy may cover the expenses. If legal action is taken, renters insurance usually covers legal representation.

3. Loss Of Use 

If your rental property becomes uninhabitable, renters insurance coverage typically includes payment for alternative accommodations during the repair period. This coverage can include expenses such as hotel bills, restaurant meals and other costs borne by the loss of use.

4. Medical 

Medical payments coverage provides payment if someone on the property gets hurt and the tenant is responsible. However, there is a difference between the two types of coverage. Medical payments coverage will pay regardless of who is at fault for the injury, while liability insurance only pays if you are found responsible. Also, liability coverage normally has higher limits than medical payments coverage.

What Isn’t Covered

As with any insurance policy, renters insurance doesn’t cover absolutely everything. In most cases, renters insurance won’t cover damage caused by floods.

Renters insurance can cover mold damage to personal property, but only if the mold resulted from a covered event, like a burst pipe or storm damage; it generally does not cover mold from negligence, lack of maintenance, or gradual issues like high humidity, and coverage often has limits, so they might need an endorsement for better protection.

7 Reasons to Require Renters Insurance

Renters insurance is not mandated by state or federal law, but landlords have the legal right to require it. Many property management companies and landlords include a mandatory insurance coverage clause in their lease agreements.

1. Tenants’ Personal Property

Having landlord insurance will cover your property, but not tenant-owned property. And you certainly don’t want to be the one blamed if anything happens to their valuables. You can ensure that their furniture, clothing, artwork, electronics, and other personal belongings are protected.

2. Risk of Lawsuits

The last thing you want is to be tangled up in a lawsuit, merited or not. For instance, in the case that a fire occurs, tenants may seek legal action against a landlord to recover damages to their personal property. However, if your tenants have renters insurance coverage, the likelihood of lawsuits decreases significantly, since their personal property is already covered.

3. Personal Liability 

Renters insurance can be used with guests visiting your property. Without renters insurance, someone who gets hurt on your property may hold you responsible and sue you for damages. By requiring renters insurance, both landlord and tenant insurers can work it out.

Renters insurance policies include personal liability coverage to help cover medical and legal costs if a guest gets injured, which minimizes or even eliminates any expenses that might otherwise incur.

4. Relocation Costs

Although landlords are not required to cover relocation, the guilty feeling is real. With renters insurance, loss of use coverage can lighten the cost of food, lodging, and laundry, making it easier for tenants to manage the disruption.

5. Encourages Tenants to Take Responsibility

Renters should know that their insurance company will want to be notified quickly in the event of a claim. Perhaps they’ll then point out repairs to the landlord in a timely fashion.

6. Good Landlord-Tenant Relationships

If a tenant experiences a loss, having renters insurance can help resolve the situation more smoothly. Instead of blaming the landlord, the tenant files a claim, and you can focus on repairs.

7. Value

When tenants realize how affordable renters insurance can be, many find getting a policy attractive. The policy we offer costs only $12 per month at time of writing. Most policies only cost under $200 a year. That comes to about $18 per month. With a price that low, convincing our tenants to sign up for a policy has never been a problem.

How to Require Insurance

First, it should be mentioned in your lease. The lease we get from RHAWA has a section on renters insurance. We always include it. We also have a default insurance policy that we can activate if their insurance lapses. Finally, the latest requirement is to have our name listed as “Additional Interest” so that you are informed if the policy lapses.

In Summary

Requiring renters insurance helps reduce risk and protect the interests of both the landlord and the tenant. By insuring personal property and reducing the risk of legal liability, both landlords and tenants can enjoy peace of mind and perhaps save money when there is an event. Making renters insurance a requirement for your tenants is a no-brainer.