Why should landlords require Renters insurance from their tenants?

For many renters, owning a home is not the American Dream.  Owning a home can come with so many responsibilities.  However, renting could also bring some responsibilities that a renters policy could resolve for them.  

Talking to your tenant/renter about the benefits of renters insurance will greatly assist your tenant.  For most tenants, buying  a renters insurance policy might seem like an unnecessary purchase.  However, it is a mutually beneficial policy that can benefit the renter and the landlord.   

According to the Insurance Information Institute, many landlords require tenants to purchase renters insurance to avoid disputes regarding legal liability claims, damage to landlords property as well as tenants belongings.   

Coverage for the tenant:

Renter’s policies offer coverage against a variety list of perils such as fire, smoke, theft, vandalism, wind and hail, damage caused by water and other events out of their control.  It protects the tenant’s personal property such as furniture, clothes, sports equipment, small appliances, electronics and more.  

In addition, renters policy covers personal injuries and legal expenses under the personal liability limit.  An example, if someone other than the tenant gets injured while being on the property and sues the tenant—this would be a personal liability claim on the renters policy.  Another common claim that I have been involved with is, the tenant overflows the bathtub and causes damage to the landlords property.  The renters insurance may assist the tenant by paying the damage to the landlords home.

Renters policies can provide coverage for dog bites either under medical coverage or personal liability.  This can apply both on the property or off the property.  If your tenant has an animal, ask them to purchase at least $100,000 in liability coverage and confirm that the animal is covered under the renters insurance personal liability policy.  

Another important coverage section is the additional living expense coverage.  If a tenant is obligated to move out of the rental due a covered loss.  For example, during the Colorado fires in October of 2020, renters that were evacuated were able to find coverage for their additional living expenses such as paying for a hotel and meals until they were able to get back to their home.  

Coverage for the landlord:

Renters insurance policies offer property damage coverage to the landlord in the event a fire or other accident caused by the tenant’s negligence.  The landlord could be covered under the renters policy up to the liability limit.   I recommend a minimum of $100,000 personal liability on the renters policy.  

For example, a tenant leaves the water running which causes damage to the rental unit and to the unit below.  The renters policy could cover the resulting damage to both units caused by the tenant’s negligence with the liability coverage.  Renters insurance can also pay for damage to a landlords home from a large fire due to the tenants negligence.  

Landlords should also request to be added as an additional insured on the tenants renters policy as to receive any cancellation or renewal notices.

Conclusion:

Renters insurance is inexpensive and it is essential.  It can be a mutually beneficial and inexpensive way to protect both the tenant and the landlord.   It is an extremely inexpensive policy that protects both parties.   Coverage and laws can vary, so please check with your attorney if you have any legal questions.