Should Property Owners Require Residents to Have Renters Insurance?
October 21, 2020 / by Hignell Property Management Team
Everyone knows about property insurance, but there is another type of policy called renter’s insurance that is available through most carriers. Renters insurance is designed to protect the renter, however, it’s a concept every investment property owner should understand. Here's a look at this type of insurance policy and how it can benefit rental property owners.
What is Renters Insurance?
Renters insurance is an insurance policy designed to protect renters living in a home or apartment. It provides both liability insurance and the resident's personal property in the event of a disaster such as a fire, flood, robbery, or any other situation that damages belongings or leaves the apartment uninhabitable.
As a property owner, a renters insurance policy doesn’t ensure the dwelling itself — that’s what your traditional homeowners’ policy is for. Rather, it will reimburse the resident for any property that is lost or damaged, plus any exposes related to their move or relocation. Therefore, it's the responsibility of the resident to obtain a renters insurance policy if one is needed and pay the required premium.
Because a renters insurance policy only protects the belongings of the resident and other related expenses — not the property itself — it’s typically much cheaper than a homeowner’s insurance policy and is affordable for most renters. But, many property owners require residents to have a renters insurance policy just in case of an emergency.
What are the Benefits of Renters Insurance for Property Owners?
Most homeowner’s insurance policies don't cover the loss of a resident’s belongings or other related expenses in the event of a theft, natural disaster, or emergency scenario. Therefore, if there's a situation such as a fire where your resident's belongings are damaged or the dwelling becomes uninhabitable, and they do not have renters insurance, they won't be reimbursed even if the situation was out of their control.
Here are a few reasons why many property owners require their residents to take out a renter’s insurance policy:
- Avoid Lawsuits: Many residents aren’t aware of the fact that your homeowner's insurance policy does not cover their belongings, which may come as a major shock if there is ever an incident. This could lead you to get sued, which could get costly, depending on the circumstances. If the situation was an accident or natural disaster, and they were uninsured, they will likely lose the lawsuit, however, you may also lose money fighting the case. Requiring renters insurance takes care of any potentially awkward situations if there is ever a problem.
- Accept Pets: Many renters today come with furry friends, and if you don’t allow pets, you are denying a large pool of renters. However, pets can cause damage and put you at risk if someone on the property is bitten or otherwise injured by an animal. A renters insurance policy can help you offset some of these risks and allow you to rent to pet owners with confidence.
- Relocation Expenses: In some states, property owners are required to help a resident with relocation costs in the event of a natural disaster. So if there is a wildfire, flood, hurricane, or other act of nature that leaves the home or apartment uninhabitable, you may be on the hook to help your resident find a temporary dwelling or a new place to live. A renters insurance policy will cover these expenses, at least partially, so you don’t have to worry about these extra costs.
Where to Get Renters Insurance
Renters insurance is a common type of policy carried by most insurance providers. Residents can find flexible policies from online carriers like Lemonade for as little as $5 per month, as well as more traditional carriers like State Farm, Geico, and Liberty Mutual. Each carrier offers different products with different rates and features. Most can be purchased online or over the phone. If you're considering requiring your residents to purchase renter’s insurance, you should do your research and recommend one or several carriers and policies that make sense for the situation.
Topics: Residential Property Management, Investment Property