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Landlords: Always (Always, Always) Require Renters Insurance—Here’s Why

Remen Okoruwa
4 min read
Landlords: Always (Always, Always) Require Renters Insurance—Here’s Why

Sure, renters insurance is vital to cover a tenant’s personal belongings. However, it’s imperative that landlords require renters insurance on any new lease or lease renewal. Why? Renters insurance doesn’t just protect tenants; it’s useful for landlords if they need to cover a tenant’s losses caused by someone else.

So, renters insurance has numerous benefits for both landlords and tenants.

Despite this fact, renters insurance might sound like an extra expense that tenants think they can do without. In fact, if a landlord doesn’t require it, it’s unlikely that most renters will take out insurance. They may even believe that the landlord’s insurance covers all their personal belongings. But similar to most insurance policies, it’s only “an unnecessary expense” until the worst happens, and you need to file a claim.

This article examines the many reasons why it’s a good idea to require that your tenants take out renters insurance.

Related: The BiggerPockets Guide to Landlord Insurance

What Does Renters Insurance Cover?

As with any insurance, coverage depends on the policy taken out and the terms and conditions. Generally, renters insurance covers the following:

  • Damages to personal property
  • Liability for injuries
  • Losses caused by theft
  • Natural disasters
  • Relocation expenses if the rental unit is uninhabitable

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How Tenants Benefit from Renters Insurance

If you require your tenant to take out renters insurance, their first question might be why you don’t already have it. Of course, all legitimate landlords take out a Rental Dwelling Policy. However, your tenant may not realize that your insurance only covers the building’s structure and the damage caused. It won’t cover damage to the tenant’s personal property.

Let’s look at one scenario. Say there was a fire in the property, and neither you nor your tenant was to blame. Your insurance would cover the damage to things like the walls, electrics, and structure—but none of the tenant’s personal possessions. However, renters insurance would cover the damage to everything the tenants own up to the policy’s limit.

Related: What Kind of Insurance Do You Need as a Real Estate Investor?

Liability coverage is another reason why renters insurance is vital. Liability coverage protects tenants against people who claim to have been injured near or on the property. It can also protect the tenant from damage claims to other people’s property. For example, a tenant could accidentally leave a faucet on and cause water damage to the property below. The tenant files a claim to pay for the damage they caused.

Finally, it is worth reminding tenants that some renters insurance policies include additional living expenses coverage. This could help cover unexpected costs from staying in a hotel if the property is inhabitable because of the damage caused.

Is Renters Insurance Worth It for Tenants?

Renters might not be too impressed that they must pay renters insurance on top of their monthly rent. So, as a helpful landlord, you can explain the benefits and give them some general advice. After all, you’re not shirking from your responsibility by getting tenants to take out insurance. You are showing you are a responsible landlord who has the tenant’s interests at heart.

The national average for renters insurance is approximately $132 per year or $11 per month. This gives a coverage limit of $100,000. Remind them that their policy depends on the value of their contents. It’s also a good idea to encourage them to shop around for the best policies. Policy prices also fluctuate based on the area you live in and the tenant’s credit score.

How Do Landlords Benefit from Renters Insurance?

The first advantage for ensuring your tenants have renters insurance is peace of mind. Those renters that cause damage and don’t have coverage may simply abandon the property, leaving you to foot the bill. Often, the security deposit isn’t enough to cover the cost of repairs. Plus, you have to consider the time it takes to repair the damage—days, weeks, or months that you could be renting out the property to new tenants.


Here are some other benefits of ensuring your tenants have renters insurance:

  • Additional living expenses—Renters insurance covers living expenses if the rental unit is uninhabitable. Some states require landlords to cover these if the tenant doesn’t have insurance. So, you can save yourself a lot of money if the tenant has an insurance policy.
  • Stolen property—Renters insurance covers damages or losses for stolen property. Without renters insurance, a tenant could sue you because you have to ensure the property has adequate security. But they are more likely to claim on their insurance rather than file a lawsuit.
  • Pets—Renters insurance lets you be a pet-friendly landlord. This fact makes it easier to attract tenants and reduce rental vacancies. Renters insurance that includes pet liability gives you peace of mind if your tenant has cats, dogs, or other pets.
  • Landlord insurance premiums—Insisting tenants take out renters insurance can lower your premiums. For example, your premiums will shoot up if you make claims for property damage or injuries caused by tenants. Tenants who have renters insurance are more likely to accept part of the blame and claim on their insurance policy.
  • A sign of a responsible tenant—Landlords should thoroughly screen all potential tenants to ensure they are good renters. Credit reports and background checks provide a part of the screening information. Tenants willing to take out renters insurance generally show they are more dependable and committed to their responsibilities.

Related: 4 Tips to Deal With Water Damage in Your Rental Property

How Should Landlords Request Renters Insurance

According to the Insurance Information Institute, landlords have the right to request that tenants purchase renters insurance. As a landlord, you can request renters insurance for new lease contracts or when renewing lease contracts. The requirement should be part of the rental agreement. It’s also a good idea to mention renters insurance during the tenant interview, so there are no surprises later on.

It is usual for tenants to provide proof of renters insurance within 14 days of the lease start date.

Most property management software and rent collection apps have provisions for renters insurance. The apps have integrated services that allow renters to buy the appropriate insurance policy quickly. Additionally, landlords who use these apps benefit from faster online rent payments, electronic maintenance requests, rental applications, and digitally signed documents.

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Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.