Investor · Maryville, IL · Member since 2016 · 129 posts · 81 votes
My insurance agent has provided me with wise information on multiple occasions (the greatest money saver so far is to NOT escrow my insurance and bundle my properties when they are geographically located in close proximity - if we get a hail storm, as we are prone here in the Midwest - I will only pay one deductible as opposed to a deductible for each property in a claim - maybe you knew this, I did not!).
Aaaaaaanyway, he recently encouraged me to require renter's insurance for all my tenants. Basic liability quotes are around less than $20 per month for approximately $20k personal property coverage and $300k liability coverage. The advantage to me is if a guest is visiting my tenant and they fall and smash their face on the coffee table, there is money to be collected from a liability policy that doesn't impact my insurance or my personal holdings. The disadvantage is my tenant has to pay a little more each month and it's just one more thing that a renter may not want to do.
I'm debating making it optional with a credit to the monthly rent - enough to incentivize the tenant, but not quite enough to cover the full cost with any leftover ($10-15 off monthly rent).
Do you require any form of renter's insurance? Why or why not?
It's called "Additional Interest" or sometimes called "Third Party Designee". It's common and every insurer will know what it means. What you don't want is to be listed as insured under a tenant rental policy.
My insurance agent has provided me with wise information on multiple occasions (the greatest money saver so far is to NOT escrow my insurance and bundle my properties when they are geographically located in close proximity - if we get a hail storm, as we are prone here in the Midwest - I will only pay one deductible as opposed to a deductible for each property in a claim - maybe you knew this, I did not!).
Aaaaaaanyway, he recently encouraged me to require renter's insurance for all my tenants. Basic liability quotes are around less than $20 per month for approximately $20k personal property coverage and $300k liability coverage. The advantage to me is if a guest is visiting my tenant and they fall and smash their face on the coffee table, there is money to be collected from a liability policy that doesn't impact my insurance or my personal holdings. The disadvantage is my tenant has to pay a little more each month and it's just one more thing that a renter may not want to do.
I'm debating making it optional with a credit to the monthly rent - enough to incentivize the tenant, but not quite enough to cover the full cost with any leftover ($10-15 off monthly rent).
Do you require any form of renter's insurance? Why or why not?
This is a topic often discussed among my local REI group. We had an insurance broker come speak who happens to also live locally. She said that, and of course you can't make anyone do anything but, as owners we could tell the tenant we require them to have renters insurance. If they get it she said that we should have ourselves added to the policy ( in some way for notification but not for liability or responsibility of payment ) so that if they cancel we would get a notice and then we could take some form of action. Like charge them as per the lease that stipulates they need to get insurance. I've heard back and forth on this that yes you can do this and others say no you can't. In the forum though I have seen from other members that they successfully implement this with their tenants.
I don't at the moment but with turn over I will have the PM inform them they need to get renters insurance. I need to speak with the insurance broker again to get the correct terms to use. I don't think I would be "on" the policy but it's something to do with being notified if they cancel it. Anyone can get it and show proof to the PM and then move in and then cancel it. Being associated with the renters policy somehow to get a notice will alert me they dropped the insurance.
It's called "Additional Interest" or sometimes called "Third Party Designee". It's common and every insurer will know what it means. What you don't want is to be listed as insured under a tenant rental policy.
Yup, same language as the bank has if you cxl insurance on your mortgaged residence...regarding the tenant, it's a notification clause that identifies you as an interested party, but not obligated to pay the insurance or responsible for any of the happenings, just that if they lapse, you get a notification as well as the policy holder.
Sounds like they teach this in "insurance class!"
I seriously doubt I could kick out a tenant for letting their insurance lapse (and frankly not sure I want to). I do wonder if the incentive would be attractive enough to convince them to do it. I guess I don't feel to threatened by this type of liability, but I also feel like any additional layer of protection to my assets is a good thing.
Coincidentally, I never considered RI when I was renting, lol...never had anything I considered worth the trouble.
It's called "Additional Interest" or sometimes called "Third Party Designee". It's common and every insurer will know what it means. What you don't want is to be listed as insured under a tenant rental policy.
Thank you Mike! I can never remember what the term is. I should probably make a note in my phone. :-)
San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
10y
I think it's a great idea to require it. I always carry renter's insurance, as a renter, and the coverage that matters the most to me, is the loss of use rider. I would suggest requiring this of your tenants. Where I live now, I have a couple different riders, and my insurance is still only about $25/month. The cheapest policy, with only liability and personal property coverage, is usually only around $15/month. I would not share the cost with them. This is becoming more common.
As a manager who has had to get a tenant to move out temporarily because of a flooded pipe, etc., I can tell you that even in a very simply-worded contract, with a section that clearly and simply explains that if something happens, the landlord is not liable for damage to their property, etc., and that we strongly suggest they get renter's insurance to cover them, tenants will look at you in shock and amazement that they have to pay for their hotel bill, beyond the reimbursement for just the rent amount (which of course doesn't touch the hotel bill). And that the landlord is not responsible for replacing their stuff, even if the damage wasn't their fault.
You make it simple, you explain it in person, in simple language, and it goes in one ear and out the other.
We didn't require it, but I'm all for it. The places I've lived in subsidized senior housing the last couple of years doesn't require it, although one of them wanted a copy of my coverage summary. No problem.
I would require it. Lots of landlords are now requiring it. For me, I wouldn't worry so much about doing it for liability, because that's what my insurance is for. Of course, your agent would love for you to require it so they can minimize their losses by going after the tenants' insurance first. But, the reason I'd require it, would be to insist on that loss of use rider and their personal property coverage, so when they look at me in fear and I say, "No, we don't pay for that," before they can start crying, I can then say, "But, that insurance you got WILL pay for it."
One of my additional riders is for water damage from indoor flooding. You really need to make sure your policy covers you and ask about extra riders. This way, if the old lady upstairs lets her bathtub overflow and it floods my apartment, I'm covered. Without that rider, I wouldn't be.
One thing you could do as a landlord/manager, is require minimal coverage, and then have them check a list of coverage they're opting not to carry, with a short description of what that is. Then, when they come crying to you, you can give them a printout of their list.
Rental Property Investor · Gainesville, FL · Member since 2015 · 1k+ posts · 432 votes
10y
I would also be concerned if they don't have it and something happens and I have to take a hit on my insurance. Not for their personal possessions but for the damage they caused. From other posts I've read, there can be incidents that are caused by the tenant/tenants guests that if they don't have insurance, the owners insurance would take a hit to get the problem remedied.
Insurance Agent / Investor · Shelby Township, MI · Member since 2015 · 43 posts · 16 votes
10y
I would recommend having your tenants carry renters insurance for many reasons. The main one which has been discussed is for liability purposes. Another reason is if the tenants property is damaged as a result of something happening with the home - a pipe bursting as an example. If the tenants doesn't have renters insurance they are stuck with water damaged property. In most cases though the tenant will try to collect from someone which will end up being you. I am not saying they will be successful but it avoids a bad situation if they had renters insurance. I personally do not offer a credit to my tenants to incentivize them to carry it. Search online of horror stories of people not having renters insurance then share them with your tenants then I am sure they will see enough value of paying $10 - $20/month for coverage.
Investor · Kansas City, MO · Member since 2016 · 130 posts · 64 votes
10y
As a former fire insurance adjuster I would highly recommend requiring it. You can't lose on the liability side of it no doubt.
The saddest thing I would see is people who didn't have insurance and their house burned down. When it did they had nothing and no place to live. If they can't afford $15-$20 a month you may have other concerns too IMO.
San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
10y
@Michael H. No kidding. How sad. And I'm old enough to realize that even though I don't have anything very fancy, when you look at replacing your furniture and clothing and pots and pans and bedding, let alone your electronics, it sure adds up in a hurry.
I have never needed my homeowners or renter's insurance policies, but I would never be without them. It's peace of mind. And I figure, the first day I'd let them go, is the day I'd need them.
Real Estate Agent · Southington, CT · Member since 2008 · 5k+ posts · 3k+ votes
10y
When we break down for renters why they should have renters insurance we have never had one balk at getting it. I think the willingness of tenants to get this type of insurance will be largely based on the tenant class you are dealing with. Even in our C+ area properties we do not get any resistance to renters insurance but I imagine as you go lower in property class you may.
Investor · Maryville, IL · Member since 2016 · 129 posts · 81 votes
10y
So, I'm hearing a pretty big thumbs up on requiring them to have it (at least strongly suggested and clearly pointed what could happen if they do not). Thank you for the unanimous support!
Would anybody know a solid answer on the legality of requiring it?
I can see it being a requirement for application, perhaps, but what about if they let it lapse? If it were written into my contract that I require it, would that be a sufficient condition for eviction if they failed to perform?
Rental Property Investor · Gainesville, FL · Member since 2015 · 1k+ posts · 432 votes
10y
I'm not sure about eviction but certainly having it written in the lease contract that if they lapse then the landlord will purchase sufficient renters insurance for the tenant and bill back to the tenant. It is part of the lease contract just like including other agreements for which they sign off on. I would go over the lease with them step by step and have them initial every page as acceptance with signing the lease.
Investor · Maryville, IL · Member since 2016 · 129 posts · 81 votes
10y
Daria,
Instead of signing each page, I have 25 sections with a box to the left hand side of each section that I require an initial.
I guess the question is, "Is it legal to put this term in the agreement/Would a court support this condition?"
Similar to late fees, I can only demand so much before the courts would say that I'm demanding too much in penalties from my tenant - but that can also fall under the category of usury, so...not really sure that is a relevant argument.
I'm really interested to hear if anybody has ever used this clause as an eviction method.
Lenexa, KS · Member since 2015 · 206 posts · 53 votes
10y
it's required via my lease. But there's no process to enforce/verify short of asking for a copy at the start and verifying word of mouth if they have it in place.
Specialist · Lakewood, CO · Member since 2014 · 1k+ posts · 1k+ votes
10y
I mandate renter's insurance in my lease in Colorado. I had it reviewed by an attorney (yes I know, some attorney's suck) and he had no issue with it. I didn't specifically ask about it because the PM company I used previously also mandated it. I think CO is good to require it.
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
10y
Should they have it? Yes, of course. Is it realistic to enforce? No, in my opinion. If you only have one unit, you might be able to keep up with it, but unless you are prepared to evict an otherwise good tenant for not having insurance that protects their interests, I believe it's just more administrative hassle than benefit.
I carry plenty of liability and damage insurance for my own benefit, and if someone falls and cracks their head and sues, they're going to sue me regardless of whether the tenant has insurance anyway. Any good attorney is only going to look at what may be obtained in the case, i.e. you reverse engineer the liability based on ability to pay and potential payout. A renter might carry some damage insurance for their stuff and maybe 5 figures of liability. I own the house and carry 7 figures. Which is more attractive to the attorney?
Anyway, I recommend it to my tenants, and leave it at that.
Rental Property Investor · Sioux Falls, SD · Member since 2015 · 9k+ posts · 18k+ votes
10y
I recommend insurance to tenants and make it clear that I am not responsible for damage to their belongings. This is stated in my lease. I have heard of other landlords requiring renters insurance in their lease. Keep in mind, just because you require it doesn't mean you need to enforce them having it. The reason I wouldn't enforce is because it becomes time consuming and are you really going to evict someone if they don't have it? I certainly wouldn't offer a discount on rent for them to get renters insurance. @JD Martin had a valid point which is that if someone gets harmed on the property, they are going after the landlord. Lawyers always look for the deepest pocket.
San Jose, CA · Member since 2015 · 4k+ posts · 3k+ votes
10y
@Kurt Gardner It's my opinion that you could evict a tenant for breach of contract, if your contract specifically says they must carry insurance, and they drop it.
What I'd do is put a clause that is very clear and specific: Renter's insurance is required with continual coverage during the tenancy that covers (put your requirements here - liability in the amount of xxx, loss of use in the amount of xxx, etc.). A lapse in coverage will be considered a material breach of this contract and would be grounds for eviction.
And make them initial it.
You can ask attorneys questions for free and/or cheap on this website:
My agent prompted me on my most recent application for coverage to consider it. I have four single family homes in a radius of approximately 5 miles. This area is (and my entire area for that matter - STL) is notorious for getting pretty sever thunderstorms during the spring and summer. It isn't uncommon to get a pretty good hail dump and that, as you may know, will cause havoc to roof and vinyl siding.
Because these four properties are so close together, it is smarter to cover them under a "blanket policy" because 1) it doesn't cost me any more money each month to pay the premiums (doesn't save me any on the premiums either, lol), 2) I can still budget them month to month without any penalty to break the payments down (eg. no $2 charge or other service fee) just like escrowing the money, and 3) if an event occurs and I need to make a claim, whether on one or all four residences, I just pay the deductible one time instead of for each property ($1000 x 4).
His simple breakdown is, it's not really a special type of deal, it just has all the properties listed on one piece of paper instead of four. I pressed him a couple of times to explain my risk in this, and as best as I can tell, I'm risking $3,000 if I keep them separate.
The reason I cannot escrow them is because the blanket policy has to be paid for once a month in one payment (or twice a year or once a year, whatever you like), and not from four different "pools."
So essentially I pay PIT on four properties with my automatic payment to the bank, and I pay "I" on four properties AT ONE TIME once a month by automatic draft to my agent.
Tega Cay, SC · Member since 2014 · 213 posts · 74 votes
10y
@Kurt Gardner I make all tenants get renters ins. It is nonnegotiable and in my lease. I make them provide it before they move in. I do have tenants that need help with obtaining it, so I put them in touch with my ins agent and then I fill out form for renters ins, have them sign it, and just add to the monthly rent. They deduct the renters ins from my account, but i get it in the rent. I also charge $5 a month for this. Ex..I have tenant at $800 a month and her renters ins is $16. I collect from her $821 per month.
Haven't had a tenant need to use it yet (knock on wood), but when the time comes i am sure i will be glad i did.
