What’s the deal with renter’s insurance? As a landlord, do you really need to require it? Are you even allowed to require it by law? As a tenant, should you really pay for it? Is it worth it? In this blog, we’ll dive into this topic and explain the benefits of renter’s insurance for tenants and landlords.
One of the reasons that renter’s insurance can sometimes be dismissed is because people often assume that the landlord’s policy covers more than it does. However, the landlord’s policy typically applies directly to the actual property not to the tenant’s personal property. Renter’s insurance also helps provide certain liability protection for tenants and even potentially temporary relocation costs due to covered disasters (a fire, for example).
It Protects a Tenant’s Personal Property
Let’s talk about that first part: the tenant’s personal property. If property should be stolen or damaged, then in most cases the renter’s insurance should cover it. Renter’s insurance typically even covers their property when they’re traveling, so whether their property is at home or with them during their travels it will most likely be protected. It’s, of course, important for tenants to double check their policies to ensure they know exactly what is covered.
Some tenants don’t believe that their property is worth paying rental insurance for. However, this is typically a false conclusion since the value of personal property can add up quickly. It can be helpful for a tenant to look over their personal property and try to put a number to what things are actually worth, so that they can adequately decide whether renter insurance is worth it (in most cases, it is). Electronic devices, furniture, clothing, and shoes can be expensive for a tenant to have to replace if something should happen (a fire, a theft, etc.).
It Provides Certain Liability Coverage
If the tenant or someone else gets injured at the rental unit, typically, this is something the rental insurance will cover. There are a variety of ways a person could be injured. For example, if the tenant owns a dog and their dog decides to bite someone or if someone trips in the apartment and get hurts. These are just two possibilities. Keep in mind, renter’s insurance typically won’t cover an injury that was intentional or done because of a tenant’s obvious negligence.
It Often Offers Relocation Expenses
What about that third part we mentioned above — relocation expenses? This is another item that renter’s insurance will commonly offer (make sure to check the policy). In this case, if something happens to the apartment that makes it an uninhabitable environment (such as a fire), the renter’s insurance may cover the added expense of having to stay somewhere else. Staying in a hotel can add up fast, so this is a real value added for many tenants. It’s also beneficial to landlords since some states might require that they cover the relocation costs if the tenant doesn’t have renter’s insurance to cover this. It can also help out landlords who feel sympathetic and want to chip in to help tenants temporarily relocate; this allows the landlord and the tenant to rest easy, knowing the tenant’s stay is taken care of.
It Can Help Protect Against Legal Costs
Another way renter’s insurance helps both landlords and tenants is by lowering the possibility of a lawsuit or associated court costs. For example, if the renter’s insurance covers the damage, the tenant isn’t likely to go after the landlord trying to get some kind of restitution. This helps eliminate the hassle and expenses of a lawsuit. Renter’s insurance also helps reduce the chance of having to pay high court costs for the tenant by providing protection in case someone would sue the tenant if injured on the property.
It’s easy to see how renter’s insurance can help both the tenant and the landlord. However, not all renters pay for it. Many may not be aware of how affordable it really is. In 2022, it was said to range from just $15 to $30 a month. That’s a minimal fee when you weigh how much the tenant’s personal property is worth and the added coverage it provides. While it can be greatly beneficial to tenants, not all tenants will choose to purchase it. This is why some landlords require it. Because not only does it provide the tenant protection, but it also helps protect the landlord from a potential lawsuit or having to pay relocation fees, for example.
If you’re a landlord, should you require rental insurance? Most likely. In the majority of states, landlords can require this and probably should. However, landlords need to check their local and state laws to make sure it’s allowed before putting it in the lease.
There’s a lot that goes into creating a thorough lease, finding the right tenants, protecting your investment, and the day-to-day management of your rental properties. If you’d like any help, please reach out to us at PMI. We’re invested in helping our client’s investments prosper.