your take on renters insurance?

12 Replies

What's everyone's stance on having their renters carry renters liability insurance?

We require it for all our properties.    If something happens,  they need someone to sue!    We require them to have a minimum $100K liability, but most have significantly more.  

We learned our lesson the hard way and require renters insurance of our tenants that runs $150/year or slightly more than ten dollars a month. Its so cheap that I thought of covering for our tenants but all of mine paid for their own.

Prior to my requiring tenant insurance, one tenant claimed a break in and demand we reimburse him for his losses, about $1500. We refused, he got an attorney, we consulted one, and our lawyer, insurance agent suggested it's cheaper to pay than litigate. Tenant claimed lack of security and flimsy locks caused the loss. We ask him to leave at the end of the lease.

Another tenant left his windows open in a heavy rainstorm, all his clothes and my carpeting and wooden floors were ruined. In this case, my lease required renter's insurance. He was slick, bought it, showed me the insurance, then cancelled it. When the loss occurred, he tried to collect on my liability insurance. I said "no way, collect from your insurance, and in fact, I'll file a claim against yours". In this case, I threatened to evict him for violating the lease by cancelling the renter's insurance. He backed down.

I have friends owning rentals, and they got tenant's claiming bogus losses. Suddenly pairs of shoes worth $400 each allegedly stolen by your contractors. So I tell them, get renters insurance and have the insurance company put up with the BS. Add $10.00 to your monthly rent and offer to pay it for them if they show you the receipt. My insurance agent tells me I can't buy it for my tenants.

BTW, many tenants assume landlords carry liability insurance and it covers them. They're shocked to learn it doesn't.

We require our tenants to have a minimum 1M liability insurance.

We recommend it but realize that most don't get it, and if they do get it there's nothing to keep them from cancelling it or failing to renew. Unless you are going to take action on tenants that do not get it, I wouldn't make it an actionable issue. Sometimes it is going to depend on your market; I live in an area where probably 50% of homeowners don't have insurance, so to expect that renters are going to keep up on something like that is laughable. 

Personally, I don't care if they carry it or not. I have excellent insurance, and if the tenant does something and my insurance has to pay, they are going to go after the tenant to abrogate their losses. If the tenant doesn't have any insurance, well, they'll have to deal with the insurance company in court. If the tenant suffers a loss because they don't have insurance, well, that's really too bad for them. Either way, I'm not going to get into the business of carrying out evictions over renter's insurance. 

Thanks for all the info! I appreciate it!

I spell out in my lease that NOTHING owned by the tenant is coved by the Landlords insurance.  It also "recommends" that they obtain renters insurance so that they are covered.  I know there is no way for me to track who keeps their insurance after they get it unless I require them to provide me a copy of their renewal policy every time it renews.  That would be a big hassle.  I have them initial in the lease next to the section explaining about the insurance, indicating that they understand that their property is not covered and that they should get their own insurance.  If they don't it's on them.  I haven't had a problem yet.  (Yet... hopefully never).  I also have a ton of liability insurance coverage to be on the safe side.

Originally posted by @Michael Badin :

I spell out in my lease that NOTHING owned by the tenant is coved by the Landlords insurance.  It also "recommends" that they obtain renters insurance so that they are covered.  I know there is no way for me to track who keeps their insurance after they get it unless I require them to provide me a copy of their renewal policy every time it renews.  That would be a big hassle.  I have them initial in the lease next to the section explaining about the insurance, indicating that they understand that their property is not covered and that they should get their own insurance.  If they don't it's on them.  I haven't had a problem yet.  (Yet... hopefully never).  I also have a ton of liability insurance coverage to be on the safe side.

 There is a  way to track it:

1. Have them provide you with a certificate of insurance when they buy it. Put requirement in the lease.

2. Have them name you as additional insured (that's what they call it here in NY, but additional insured has another name elsewhere.)

3. State in my lease landlord is absolutely not responsible for tenant property. Even so, tenant comes up with BS excuses it's your negligence that caused his loss and sue.

The additional insured designation would insure that the insurance company also notify you in the event he cancels the insurance. I learn this the hard way from my insurance agent after my tenant got the insurance and then cancelled it. I later ran a business and the landlord required in the lease a certificate of insurance when I got my policy with him named as the additional insured as well. 

@Frank Chin You are correct that having them place you as an additional insured will keep you notified if the policy is canceled or not.   However there is a problem with your strategy.  I have been an insurance adjuster for over 14 years so I have some experience with this. The problem with that strategy is that what you are actually doing is making your tenants give you part ownership in all of their personal belongings (as far as the insurance company is concerned.)  If you don't have any ownership in the personal belongings of your tenants it is fraud to have you listed as an additional insured.  It is against the law to have insurance on any property you do not have an insurable interest in.  If one of your tenants was to ever have a claim the check they are issued would include your name on it.  That means you have a right to some of the funds.  That is fraud.  If the insurance company was to find out they could actually deny the claim based on the fact that you are on the policy, if they wanted to be real strict they could prosecute and you could do jail time.  Now I don't think that is a likely outcome for you but it is within the law and is a real possibility which is why I will not be using the strategy.  

Frank,

Michael is confusing "Additional Insured" and "Loss Payee".   A Loss Payee (example is a Mortgagee) has an insurable interest in a property or item and can be listed on a policy.  A Loss Payee would normally be listed on a claim check.   An Additional Insured is used in a Liability Situation.  The confusion may come because many Personal Insurance policies will not list an additional Insured and someone may have used the Loss Payee clause to get notification of the cancellation.   Check with your agent and have them check for alternatives that will get you notification.  The Tenant may be able to designate you to receive notice.

Originally posted by @Michael Badin :

@Frank Chin You are correct that having them place you as an additional insured will keep you notified if the policy is canceled or not.   However there is a problem with your strategy.  I have been an insurance adjuster for over 14 years so I have some experience with this. The problem with that strategy is that what you are actually doing is making your tenants give you part ownership in all of their personal belongings (as far as the insurance company is concerned.)  If you don't have any ownership in the personal belongings of your tenants it is fraud to have you listed as an additional insured.  It is against the law to have insurance on any property you do not have an insurable interest in.  If one of your tenants was to ever have a claim the check they are issued would include your name on it.  That means you have a right to some of the funds.  That is fraud.  If the insurance company was to find out they could actually deny the claim based on the fact that you are on the policy, if they wanted to be real strict they could prosecute and you could do jail time.  Now I don't think that is a likely outcome for you but it is within the law and is a real possibility which is why I will not be using the strategy.  

 This was suggested by my insurance agent. Else, the tenant can show me the certificate of insurance, then cancel the insurance right away, which is what a tenant of mine did.

I also rented commercial property and landlords have the same requirement in their lease. If this issue leads to fraud, insurance companies better think of a fix. Instead of additional insured, have an additional notified. They have such things already for seniors notifying relatives, if for instance, if the electric bill isn't paid.

For $150/year, I'm more than happy to buy it for the tenant. But my insurance agent says I can't buy insurance for somebody else, it's fraud. I planned on reimbursing the tenant if they buy it. But if I paid it, what's to prevent them from cancelling it, secure in the knowledge I will not be notified, and collect the refund?

Since it's such a common practice around here, even recommended by insurance agents, and widely used, I have a good case that it prevents fraud, not perpetrate it.

In fact, the more common fraud is tenants claiming their things got stolen due to landlord negligence, and collect on landlord liability insurance. Suddenly tenants that look like slobs had their expensive mink coats and expensive designer shoes stolen. Fraud??

If you're in the insurance business, maybe it's an important point you should pass on to the insurance companies. They can even sell more renters insurance particularly if there's no way for landlords to track it, and any way to track is called fraud.  You notice on this thread landlords are not pushing hard on it due to the way insurance company handles it.

Or maybe there's an insurance company doing it already.

@John Mocker   I am sorry to tell you but you are incorrect.  Additional insured's have nothing to do with liability. Additional insureds are in fact insureds on the insurance policy. By law all insureds must be included on all first-party claims. I issue these claim payments every single day at work. I am not confusing loss payee with additional insured. All additional insureds are in fact loss payees on first-party claims.  Liability claims are third party claims and do not deal with payments to the insured but rather a third party claimant. You are correct that a mortgagee is an additional insured. And as an additional insured a mortgagee is included on all claim checks for the property they are considered an additional insured. On a homeowner's policy a mortgage company is considered an additional insured for the dwelling but not an additional insured for the personal property.

There are many things on this forum that I am not well educated on yet. I am working on educating myself in many areas of Real Estate. However I have over 14 years experience with this and I am not confused on it. I deal with it every day.

@Frank Chin   I agree with you that there should be a way to track for landlords. Unfortunately as of right now I know of no way to do that. (At least not legally.)  I also agree with you about tenant fraud, claiming damages that never existed. It is a big problem. My suggestion would be to include the insurance clause of recommending or requiring renters insurance.  Have them sign an attestation that they understand that all personal property is not covered by the landlord policy. You then include another clause (worded better by your attorney) stating that if the tenant sues you and is found to be in the wrong then any and all costs associated with your defense is paid by the tenant. This could include attorney fees, court costs, lost wages for time lost at your day job, etc. If your tenant tries to sue you for a personal property insurance claim then you can show them where they signed acknowledging that they knew they were responsible to get their own insurance and that your insurance does not cover them. Then show them the legal clause and perhaps they will come to their senses and drop their suit.

Sorry for the long post everyone.

In the UK a contractual clause requiring tenants to carry renters insurance would be deemed unreasonable if it were challenged.

https://www.theguardian.com/money/2012/apr/27/lett...

As it says in the response it is a matter for a tenant whether or not they choose to insure their personal belongings and I consider that to be a good principle. 

That said I have a holistic outlook on this.  If my tenants suffer an uninsured loss that may have a knock on effect on their ability and/or willingness to pay rent and of course my property may suffer collateral damage from their loss. 

So I consider it to be in my interest for my tenants to have renters insurance, so much so that I am willing to pay for it. I have never before put up rents (into my 5th year as a landlord) but in the New Year there will be a $30 a month increase across the board out of which I will pay renters insurance for all occupants of my houses.

It will also have the beneficial side effect of ensuring all occupants get put on the lease. You are going to pay the rent increase anyway, so you might as well take the insurance and get everybody on the lease so that they can get on the policy.

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