rental insurance do you require it?

[Charlotte Goodman]

Does anyone require their tenants to purchase rental insurance ? I have heard of some larger groups adding 5-10 per month to rent to cover insurance . Is anyone doing this? What company, if you are doing this are you using?

Thanks

[Al D.]

@Kevin Carpenter Specifically to address your question about how tenant’s insurance benefits the landlord:

Imagine you own an SFR that is tenanted and insured by you as a rental property. You are more mindful about liability than you are about having to rebuild in case of a (covered) damage to the property. As such, somehow, your Dwelling Coverage hasn't increased, at all, in the years since you bought the property and originally had it insured by the current insurer - not kept up with inflation. (Luckily, your premium hasn't gone up that much, so you were happy with that situation.)

Then imagine that one morning you get a call (the property is on the other side of the country from you) that there was a fire, and the tenant claims that it was a wire in the attic that the FD found to have been chewed on by a rodent that caused a short and led to the insulation catching on fire… total loss, except exterior walls.

You file a claim with your insurer. Your adjuster congratulates you that you are going to get paid 100% of your Dwelling Coverage. Great. But there is a problem:

Your own adjuster’s report shows a *gap* of, say $50k, between what the adjuster estimates it will cost to rebuild and your policy’s maximum. And you soon find out that any (licensed) GC quote you get is also for around that same gap. But here’s where tenant’s having their own liability coverage should come in:

Remember that attic wire? Well, the FD report doesn’t happen to mention it, like at all. What it does mention is that the tenant had an extension cord connected to a camera in the back patio. The tenant knew before the fire that the camera was not operational. The FD personnel look at the extension cord and note multiple (!) rodent chew/bite marks on it, which (after a separate follow-up) they confirm to you predate the day of the fire. The FD personnel also note in the report that said cord was meandering under firewood and in the immediate vicinity of fire starter logs for the tenant’s backyard fire pit. Physical evidence shows that the fire started there, grew to reach the eaves, spread across the attic… add two fire hoses…

The cord, the camera, the firewood, and the fire pit all belonged to the tenant - the one who probably didn’t think you’d ever read the FD report. Luckily, they were insured. And they were covered for negligence. (But if the facts of the case, as I described, should actually suggest to their insurer that it was gross negligence, they were not covered for that.)

This happened to a “friend” a couple of months ago. The claim to the tenant’s policy is currently pending. Had the landlord known the (actual true) facts about how the fire happened in the beginning, this landlord would only have filed a claim directly against the tenant’s policy only.