Should You Require Your Renters to Have Renter’s Insurance?

As a property manager, you likely know what renter’s insurance is and have heard it talked about quite often. However, you may not have thought about why it’s important — both for your renters and for you.

There are many benefits to renter’s insurance that you should be aware of, but first, let’s start off with the basics.

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What is renter’s insurance and what does it cover?

Renter’s insurance is a form of property insurance that includes liability coverage for tenants and protection of tenants’ belongings within the rental property, but does not cover the property itself or the structure of the dwelling.

Renter’s insurance typically covers personal property, liability, and additional living expenses. Coverage of personal property may include the cost to repair or replace certain belongings, such as clothing, furniture, and electronics. Liability coverage may protect a tenant’s personal liability in situations if they accidentally damage someone else’s property through their own actions. What’s more, renter’s insurance can cover additional living expenses in the case that a tenant’s property is damaged (perhaps by theft or certain natural disasters) and temporary alternate living arrangements need to be made. AllState Insurance provides a useful chart to help tenants figure out what may be covered under a renter’s insurance policy. Ultimately, the amount of coverage a tenant receives usually depends on the value of their belongings.

What are the benefits of renter’s insurance for you as a property manager?

While renter’s insurance is primarily for the benefit of your tenants, it can benefit you as the property manager as well. Knowing that the insurance policy is in place is sure to afford you some peace of mind, just in case anything happens to your tenants or their rental property.

There’s less of a burden on you.

A main benefit for you as a property manager is that renter’s insurance typically covers the cost of cleaning up a property and disposing of destroyed belongings in the case of damage — which means less responsibility for you. If your tenants have renter’s insurance, the damage and losses suffered are the responsibility of their insurance company. That means the burden of handling the property damage and temporary relocation for the tenant won’t fall on you, and you can rest easy.

Requiring renter’s insurance helps to develop a sort of tenant screening process.

If you make renter’s insurance a requirement for your tenants, and your candidates say that they can’t afford it, that’s a sign something’s wrong. After all, a prospective tenant who can’t afford the monthly costs of renter’s insurance may not be so great at paying monthly rent, either. Knowing this information about a candidate can be helpful for figuring out who qualifies as an ideal tenant for you.

You can protect yourself from lawsuits.

In the aftermath of property damage, tenants without renter’s insurance may be desperate to pin financial responsibility on someone else — and the first person they usually turn to is their property manager or landlord. Unfortunately, when tenants are in such a tight bind and can’t afford to replace property or pay for the costs of repairs, they are more likely to bring a lawsuit against their landlord or property manager.

You can easily prevent this by requiring your tenants to have renter’s insurance in place. Doing so is the best option for protecting all parties involved — namely, both you and your tenants. While they can lean on the extra security provided by their renter’s insurance policy, you can rest assured knowing that their insurance coverage protects you from unfair lawsuits and other stressful legal issues.

Renter’s insurance helps to protect your investments.

Unexpected damages to the property you rent out can negatively impact you financially if there is no insurance policy in place. Your tenants are not money-making machines; if something happens to their rental property and they need to pay for the damages, they may be short on finances for a little while — which means they’ll likely have difficulty making monthly rent. At that point, if you happen to be short on rent payments from your tenants, it’s on you to figure out how to pay the loan on your investment property in a timely manner. Not being able to pay on time could cause conflict between you and the lender, and even your credit rating could be negatively affected – ultimately hurting your chances to invest in future investment property and expand your business.

By protecting your tenants, you’re keeping them happy.

Sure, being a property manager is about running a business and isn’t necessarily about keeping your tenants happy. However, the happier and more financially secure your tenants are, most likely the happier you will be, too.

After all, renter’s insurance is relatively inexpensive, typically costing between $15 and $30 a month, which means your tenants should be able to afford a policy that can offer them (and you) a great deal of reassurance. What’s more, renter’s insurance is usually fairly versatile — so if your tenants are covered in many different areas when disaster strikes, you will be covered too!

Renter’s insurance doesn’t have to be over-complicated. Simply requiring your tenants to have a renter’s insurance policy in place can save both you and your tenants a big headache and afford you peace of mind.