Salem, NH · Member since 2013 · 66 posts · 19 votes
Good Evening...
I've seen a lot of leases where the property owner requires the tenant to show proof of Renter's Insurance. Is this something that you do? Why? I guess the real question is what impact does it have on me as a Landlord, if something were to happen, and a tenant opted not to have insurance. Obviously, we all understand that our investment properties are only insured for the dwelling (s), and not contents. I just want to know if this is something that I absolutely should require, and if so...why?
Albany, NY · Member since 2015 · 5 posts · 8 votes
11y
John, most landlords want proof of coverage at lease signing and renewal, but that does you no good if the policy cancels halfway through the term. You can and may require that tenants list you as an "additional interest," which would give you notification of cancelations, lapses, non-renewals, and renewals.
Additional interest doesn't provide you any coverage, of course, beyond the liability coverage on the policy, but it certainly puts your mind at rest. Those sound like Class A units you're renting, so intentional non-pay cancels are unlikely, but people do forget things once in a while so it's good to have.
It's usually a bit more expensive to spread out payments on the policy, but most companies will do it. The national average is around fifteen dollars a month. But with renters insurance as inexpensive as it is, there's really not much reason to do monthly payments for most people renting at that price point. But it's an option.
Investor · Middletown, NJ · Member since 2008 · 2k+ posts · 1k+ votes
11y
I've required it for the last several years. It protects the tenant's belongings, as well as their guests, plus liability. If a tenant's guest falls off their balcony and sues them, they want to be covered. I explain that my property insurance doesn't cover their liability or their belongings in case of burglary, fire, flood, etc.
Investor · New Haven, CT · Member since 2012 · 285 posts · 175 votes
11y
Absolutely. They don't move in without it. It is the first line of defense if something happens. Why use your insurance if there is a claim that could go against a renters policy. This will keep claims off your policy and your premium low.
Hanford, CA · Member since 2013 · 5k+ posts · 1k+ votes
11y
yes it is a mandatory requirement !!! I guess I should say that I have class A properties.
Renters insurance will cover their "stuff" in the case of a fire because your home owners insurance does not cover the renters personal property! You can also go after the tenants insurance for damage to the property!
There are so many more reasons to have it required than not!
Salem, NH · Member since 2013 · 66 posts · 19 votes
11y
This is all great information. I appreciate the feedback, and will be adding this clause to my leases, and make it a requirement, before moving in. I know that renter's insurance is relatively inexpensive, so it really shouldn't be much of a burden. Not to mention, my two units rent for $1600.00 per month, so a tenant really shouldn't have an issue affording a few hundred dollars for a year's worth of insurance coverage. I assume that if one of your tenant's sign a new lease, you require proof that the policy has been renewed and paid for the upcoming new lease? I've never had renter's insurance, but I assume the insurance companies require payment in full, for the year?
Albany, NY · Member since 2015 · 5 posts · 8 votes
11y
John, most landlords want proof of coverage at lease signing and renewal, but that does you no good if the policy cancels halfway through the term. You can and may require that tenants list you as an "additional interest," which would give you notification of cancelations, lapses, non-renewals, and renewals.
Additional interest doesn't provide you any coverage, of course, beyond the liability coverage on the policy, but it certainly puts your mind at rest. Those sound like Class A units you're renting, so intentional non-pay cancels are unlikely, but people do forget things once in a while so it's good to have.
It's usually a bit more expensive to spread out payments on the policy, but most companies will do it. The national average is around fifteen dollars a month. But with renters insurance as inexpensive as it is, there's really not much reason to do monthly payments for most people renting at that price point. But it's an option.
Residential Real Estate Broker · Chicago Suburbs, IL · Member since 2013 · 1k+ posts · 594 votes
11y
@Eric Narcisco thank you so much for sharing that link. I had thought additional insured was the way to go with it, not additional interest, glad I know now that it's actually additional interest is the way to go!
Albany, NY · Member since 2015 · 5 posts · 8 votes
11y
Glad to help. Just getting the information out there is a big part of what we do - there are so many misconceptions surrounding renters insurance on both sides, but many of them are tenant misconceptions. We recently completed a study (the writeup is expected to be published Wednesday) that showed 44% of renters nationwide now have insurance, a pretty fair increase from the 37% the III found, and a great start. Conscientious landlords are a crucial part of getting more renters covered.
Residential Real Estate Broker · Chicago Suburbs, IL · Member since 2013 · 1k+ posts · 594 votes
11y
Follow up question: I have been googling and have found apartment complexes requiring to be added as additional INSURED to residential tenants policies...it also seems like with commercial properties the requirement is additional INSURED...why?? What are the pros and cons of each for residential?
i had an incident where a main drain clog flooded a downstairs unit and required some time to clean up and repair. Had an arguement with the tenant where he claimed it was my responsibility to store his belongings while the repairs were being done and also that he could force me to pay for a hotel stay for him if he wanted to. I did neither of those but let him store some of his belongings in another vacant unit for a few weeks. Needless to say that conversation put a big damper on our relationship which isn't repaired to this day (but he pays and keeps his apartment nice and clean). So after this happened, i noticed that many renters insurance policies include reimbursement for additional living expenses like hotel stays when required. I added some language to my lease requiring it in hopes that next time something like that happens i'll just point to the lease and say sorry buddy pls make a claim on your renter's insurance. Whether that works or not we will see...
this happened, i noticed that many renters insurance policies include reimbursement for additional living expenses like hotel stays when required. I added some language to my lease requiring it in hopes that next time something like that happens i'll just point to the
Just about all of them do, in fact. It's a question of how much, and that's a very good reason to require it. Subject to your state, of course, but this can vary quite a bit between carriers. In most states (NY, WV, or NC are less, off the top of my head) Travelers offers $4,500 loss of use on $15,000 of personal property, for instance. That alone is worth requiring it (although someone else brought up the entirely valid point to check your state/local law as it pertains to tenant rights or the language in the lease.)
Of course, loss of use coverage hinges on a covered claim existing to begin with. If it were a water backup issue, they'd generally need a water backup endorsement to make it a covered loss.
Follow up question: I have been googling and have found apartment complexes requiring to be added as additional INSURED to residential tenants policies...it also seems like with commercial properties the requirement is additional INSURED...why?? What are the pros and cons of each for residential?
Short version: Additional interest offers you notification of policy status, additional insured confers liability coverage to you.
If a tenant's guest slips and falls, they/their health insurance carrier could name you and your tenant in a suit. Additional insured is not so bad in that situation.
If a tenant burns the place down, and the other tenants name you and the tenant in the suit, additional insured could be a positive thing there as well.
In both cases, tenants normally have the bare minimum, $100k of liability. You surely have far more than that. If the damages exceed your $300-500k liability and the $1MM umbrella you carry (hopefully, they're quite inexpensive for the coverage they offer), does the tenant's $100k policy make a real difference? Probably not.
You could, on the other hand, run into issues by being additional insured in terms of you directly recovering from the tenant's policy because liability is a third party coverage and as additional insured, you may or may not be considered to be a third party - see your state's precedent/law to be sure. Although, there may be bigger problems than that when it comes to subrogation against a tenant. Also, see here, there may be a presumption of co-insured status whether or not you're additional insured.
Many management firms (The #1 and #2 that just merged to become #1 come to mind) ask for additional insured status, but there's a cost-benefit analysis to be done based on your state, your own policies, your insurer's requirements, etc.
Note that Maryland tried to make requiring additional insured status illegal (HB 1280), though the bill did not pass. Whether they'll reintroduce it and/or other states follow suit is anyone's guess at this point, but it's not absolutely outside the realm of possibility.
Apologies for length, there are quite a few moving parts to this. Also, not an attorney, of course.
Laurel, MD · Member since 2015 · 101 posts · 30 votes
11y
Ok, I know this relates to an entirely different country but the USA also has legislation governing unfair terms in consumer contracts and they probably entail similar legal doctrines.
Basically the proposition is this. You can put whatever you like in your contract, but if it falls under the category of what the law deems to be an Unfair Term it will not be legally enforceable.
This is the UK publication entitled Unfair Terms in Tenancy Agreements.
Here's what it says about forcing your tenant to buy renters insurance.
unnecessary insurance requirements - we consider that whether tenants wish to insure their own personal belongings is a matter for them and that it is unreasonable for the landlord to make this a contractual requirement.
Albany, NY · Member since 2015 · 5 posts · 8 votes
11y
"Unconscionable contract" would be the closest doctrine here that I can think of, and has never been applied to a lease provision requiring renters insurance in any US jurisidiction I'm aware of (Not a lawyer).
Investor · Odenton, MD · Member since 2012 · 105 posts · 9 votes
11y
Without I doubt I require it. Any liability such as the place not being liveable because it flooded from a burst pipe (this happened to me) will be covered by the tenants' insurance. Any costs because of that flood such as furniture damaged can be covered by the tenants' insurance. Reduces your claim history with your own insurance company.
San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
11y
I used the Nolo Press contract that came with the book on California landlord rights and responsibilities that I had, and that contract just had a clause that suggested the tenant get renter's insurance and explained that the landlord is not responsible for damage to their personal property, etc. Because their contract did not require it, I always assumed that requiring it could be problematic. But, I don't know for sure.
I am now a renter in senior housing, and have not been required to have renter's insurance, but the last place asked me for a copy of my coverage, if I had insurance. I had no problem providing the coverage sheet.
I live in a tsunami zone right now, and I'm on the first floor of a building that just has a park between it and the ocean. My insurance carrier, The Hartford, told me that my coverage would not include damage caused by any water that came in from outside. In that case, they would not allow me the displacement money on my policy, either. I think my displacement allowance is around $4,000.
If I wanted coverage for "flood" insurance, which is what would cover the above - whether from rain from outside or a tsunami, it would be a separate policy and the deductible was around $1,000. It's not worth the extra money to me for the flood insurance.
But, if the old lady upstairs floods her bathtub, and I need to move out while repairs are made, my insurance will cover my hotel up to $4,000, and give me replacement value on all of my stuff.
I got a discount through AARP, and pay about $14/month. I think the fee to pay monthly is only around $1.00/month.
Since I carry it anyway, I wouldn't care about a landlord requiring it. But, I can see where it could be a problem. It's really a "mommy" requirement, isn't it? And really, it seems like the best it does for a landlord is help to avoid confrontations with tenants who were too cheap to pay for renter's insurance. Someone like that will probably be a pain even when they're insured ha ha.
Although, I suppose they can't come after you for a rent abatement, if their insurance coverage put them up in a hotel. But, I wonder if their insurance carrier could then come after you for a rent abatement? Perhaps this would be a situation where being named on the policy would be a bad idea?
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
11y
We absolutely require renters insurance. We present the proof of renters insurance as something we need to have before our lease is signed.
We just explain to the tenant that we require the renters insurance because we have insurance on the building and the insurance they get will protect their things. Once you break it down like that and let them know how minimal the cost is we have never had a tenant question getting renters insurance.
Realtor · Detroit, MI · Member since 2013 · 278 posts · 114 votes
11y
I think it is good for everyone involved. I will require it when I acquire my properties. I also would recommend setting up an automatic rent collection.
Investor · West Palm Beach, FL · Member since 2015 · 15 posts · 1 vote
11y
I'm confused do you put yourself as additional insured or additional interest?
Also my rental property is in my personal name and insured in my personal name. But my LLC is doing the property mgmt, collecting rent, ect... So would the additional insured/interest be my name or my LLC's name?
Professional · San Francisco, CA · Member since 2016 · 124 posts · 31 votes
9y
Many landlord require renters to have an insurance. And those who don’t do it, make a huge mistake. Requiring tenants to purchase their own insurance policy is the only real way for landlord to protect their properties. The top benefit of renters insurance involves keeping property owners out of court. When damage occurs to a renters belongings, and if the tenant does not have insurance, there’s a high probability the tenant will try to claim some type of landlord responsibility.
The other reason is that insurance policy may pay the repair costs if, for instance, the property catches fire, through no fault of the tenant.