Benefits of Renters Insurance for Landlords
Renters Insurance For Landlords Benefits Everyone
Landlords and tenants are bound by the landlord-tenant laws of their specific state. Landlords have some discretion regarding the terms that they can include in a lease, including a requirement that tenants purchase renters insurance. Landlords may mention the landlord rental insurance requirement at the time when landlords and prospective tenants discuss the tenant screening report. The landlord may also decide to wait until the prospective tenant passes the tenant background check.
Understanding Renters Insurance for Landlords
Landlords must understand the rental laws of the state where their property is located, regarding what the landlord may require, such as a specific amount of renters insurance for landlords as part of the lease. It is also essential that landlords, and not just tenants, understand the scope of renters insurance, including what is covered, and how renters insurance provides benefits to both tenants and to landlords.
The policy that landlords carry on their rental properties does not protect the property of their tenants, and does not provide other benefits or protections, such as relocation. Tenants often do not understand, assuming instead that the landlord’s policy covers all their property and belongings as well as the rental apartment, home, and other structures.
Landlords may want to suggest to tenants that they complete an inventory list of all of their belongings, which may help if a claim ever needs to be filed in the event of theft, vandalism, fire, water damage, or other types of covered damages. Policies should include enough coverage to replace all the belongings of tenants. This is a reason that landlords may want to consider a higher landlord rent insurance requirement.
7 Reasons Landlords Should Require Renters Insurance For All Tenants
Renters often do not think that they need renters insurance when they sign their lease agreement. There are several possible reasons for this misconception. The first reason is that they believe that the landlord is responsible for replacing tenant’s belongings if their possessions are damaged while the tenant resides at the rental property or if their belongings are stolen from the property.
Landlords may want to include important information to tenants from sources such as the Insurance Information Institute. The institute informs tenants that if they rent a house or an apartment and believe that the landlord is financially responsible in the event of a theft, a fire, or another event that results in destroyed or damaged belongings, the tenant is not correct. The article explains that the only way for a tenant to protect themselves financially against any catastrophic event is to purchase their own insurance since landlord insurance covering buildings and structures does not include coverage for tenant belongings.
The second reason for residents sometimes believing that they do not need to abide by landlord rental insurance terms is that they underestimate the value of their belongings. They may also be unaware that their insurance may pay for temporary relocation in case the home or apartment needs repairs that cannot take place with the tenant in the property. The insurance may cover the cost of hotel bills, or other additional living expenses during the time that tenants are unable to live in their apartment or home while repairs are being made to the property. Landlords that include a requirement that tenants purchase their own policy may need to explain to tenants that the landlord’s insurance does not include anything belonging to the tenant prior to even performing the rental credit check.
The third reason for landlords to require that tenants purchase their own insurance, and to sign a document indicating that they understand, and to subsequently provide proof that they have the minimum designated policy amount of coverage is that landlord liability is reduced in the event of damage caused by tenants or by their guests. Requiring tenants to purchase the insurance after signing the basic rental application form but before signing the lease agreement protects landlords from the first day that the tenant moves into the property. It is imperative that the clause requiring renters insurance be included in the terms of each lease renewal, and not just at the time of the initial signing of the rental lease agreement.
Landlords or property owners likely do not want to postpone requiring that tenants purchase the renters insurance. This is because landlords will likely be left trying to pay for damages and repairs if this requirement is not met by all tenants, and some catastrophe happens at the rental property. This potential liability is the fourth reason that insurance should be required for every landlord and tenant.
Liability also goes along with the fifth reason, which is consistent compliance. Landlords that require tenants to purchase the renters insurance must be consistently compliant. Otherwise, the policy that never happened, or the lapsed policy, whether a renters insurance policy or landlord insurance for rental property, leaves the property owner trying to recover financial losses. Although the landlord’s policy will cover damages, when the tenant has renters insurance, this protects landlords from having to pay the deductible on their own policy.
The sixth reason to require renters insurance is that landlords are potentially protected when a tenant’s pets cause property damage to the property of others, or if a pet belonging to a tenant causes an injury to someone else.
The last reason for the rental insurance is that it may help to reduce the possibility of a lawsuit if an injury to a tenant occurs on the premises. When both tenants and landlords comply with purchasing insurance and are diligent in keeping it current, all parties remain protected from the time that tenants sign the rental application form, and throughout the entire tenancy.
Can Landlords Require Tenants to Comply with Landlord Renters Insurance Requirement?
Many states have laws governing the signing of the lease, renting a property, pay rent or quit notices and evictions, but do not specifically require that tenants purchase insurance. Several states provide basic guidelines to help property owners and tenants understand the importance of both homeowner’s and tenant’s insurance. The State of Colorado, for example, explains the difference between open peril and named peril, the most common type of policy. Providing information to tenants that a named peril policy places the burden of proof of losses on the tenant. In contrast, an open peril places a burden of proof on the insurance company to show why any coverage is denied for claimed losses.
Similarly, the Florida Division of Consumer Affairs provides a comprehensive overview of renters insurance for residents of the state, including coverage, rates, and tips. The Texas Department of Insurance explains that property owners can require renters insurance, which means that property owners want to make sure that they have a current rental home insurance quote before designating a specific amount of insurance that tenants must purchase and maintain during their tenancy.
Many tenants likely understand the importance of a requirement by landlords that they purchase tenants insurance, that a landlord insurance policy will not cover tenant losses or damage to their possessions. Landlords may, unfortunately, experience some pushback from tenants that believe that a landlord should accept their verbal agreement to pay for any damages or that the lease statement indicating that tenants are responsible for damage to the premises should be enough, without having to purchase their own insurance. Landlords that include a clause in the lease that requires the purchase of renters insurance have the right to pursue eviction action against tenants for violating the lease when tenants fail to purchase and to maintain the renters insurance policy. Landlords that do not include the requirement at the lease signing will possibly find themselves seeking damages in court or by other legal means.
Although states typically do not require tenants to purchase a policy to protect their belongings, the various states do support landlord renters insurance requirements.