Even the most prepared landlords eventually face the unexpected.
When life gets unpredictable, insurance offers financial and psychological peace of mind.
As a property owner, you might have purchased or sought a quote for landlord insurance to cover losses like property damage, liabilities, and lost rent in case of obligatory vacancies. But your tenants’ belongings or liabilities aren’t covered by this policy.
If you want to avoid trouble down the line, it’s best to require renter’s insurance up front. This way, your tenants know they are protected, and you won’t have to worry about coverage should a theft, accident, or disaster happen.
Here are five benefits of requiring renter’s insurance in your rental business.
1. Protect Your Tenants’ Belongings
The number one reason to require renter’s insurance is because landlord policies do not cover tenant belongings.
Let’s say a criminal break-in occurs at one of your properties. Your renter leaves the premises for the weekend, and a thief smashes the window, steals their valuables, and flees into the night.
You discover the break-in the next morning. Your landlord insurance policy covers property damage, and therefore the smashed window repair. However, your policy does not cover the tenant’s valuables. Your tenant will likely be upset when they return to discover that they won’t be compensated.
Instead of risking your tenant’s anger or even losing them over this scenario, imagine now that you had required this renter to purchase renter’s insurance. Now your tenant knows they’ll be able to recover at least some of what they lost.
Renter’s insurance is the best way to protect your renter’s assets and their continued residence at your properties.
2. Prevent Blame and Litigation
Renter’s insurance also prevents blame and litigation should an accident or disaster occur.
Tenants who lose property, valuables, or even a place to live after a loss event will no doubt turn their blame on you.
Imagine that a burst of lightning during a thunderstorm hits an electrical wire and starts a fire that leaves your property uninhabitable. That tenant has just lost their property, safety, and likely a place to live. If angered enough, they may even pursue litigation and sue you.
If the tenant has renter’s insurance, however, their policy will normally cover loss of use/living expenses. Their insurance will cover their hotel bills and certain food expenses while their unit is uninhabitable due to the casualty loss event. This way, your tenant is compensated for the loss and is less likely to blame you.
3. Give Your Tenants Agency
Renter’s insurance is also a way to give your tenants agency over their own concerns. While you can and should recommend a policy, your tenants should also have the opportunity to purchase add-on policies.
Add-on policies aren’t typically included in a basic coverage plan, but many tenants may want them based on their personal needs. For instance, your tenants may choose to add water backup coverage, theft extension coverage (for car, boat, or trailer break-ins), credit card coverage, earthquake and volcano coverage, and personal property/valuables coverage.
How much renters insurance your tenants need will depend on them. But the more protected and prepared your tenants feel, the more likely they are to renew their leases and stick around for the long-term.
4. Limit Interaction with Your Own Insurance Company
Requiring renter’s insurance also saves you time and trouble.
When an accident or disaster occurs, your tenants’ insurance policies often kick in first. If their plan covers the losses, you may not even have to bother interacting with your own insurance company.
Why access your coverage if you don’t need to? Renter’s insurance provides an extra layer of protection that you’ll doubtlessly be thankful for should a loss occur.
5. Monitor Coverage on Your Property Management Software
Lastly, requiring renter’s insurance in your properties allows you to monitor your tenants’ coverage.
Many property management software plans offer the option to purchase renter’s insurance directly on the platform. If your renters choose to utilize it, you can monitor their coverage limits and expiration dates right on your software account.
This makes it easy to track all your tenants’ policies and send reminders to renew policies before they expire.
Conclusion
Renter’s insurance provides a variety of benefits for landlords and tenants for a relatively low cost. The cost of renters insurance is around $15 a month (depending on which add-on policies are included). By requiring renters to buy this affordable coverage, you can protect yourself and your tenants from the unpredictable nature of operating properties.
