your take on renters insurance?
Most Popular Reply
Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes
8yWe 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.
Skyline Properties
26 Replies
- Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes8y
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.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes8y
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.
Skyline Properties - Rental Property Investor · Apex, NC · Member since 2015 · 197 posts · 102 votes8y
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.
- Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes8y
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.
- Rental Property Investor · Apex, NC · Member since 2015 · 197 posts · 102 votes8y
@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.
- Insurance Agent · Norwalk, CT · Member since 2016 · 2k+ posts · 1k+ votes8y
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.
- Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes8y
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.
- Rental Property Investor · Apex, NC · Member since 2015 · 197 posts · 102 votes8y
@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.
- Investor · Laurel, MD · Member since 2016 · 395 posts · 191 votes8y
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.
- Investor · Prosper, TX · Member since 2018 · 15 posts · 3 votes6y
Originally posted by @JD Martin:
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.
I agree with JD here. I've been doing this for less than a year, but the points JD makes are logical to me. It seems too difficult to enforce.
During my years as a tenant, I never bought rental insurance and I would have balked at requirements to do so.
- Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes6y
Originally posted by @Nathan G.:
Originally posted by @JD Martin:
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.
I agree with JD here. I've been doing this for less than a year, but the points JD makes are logical to me. It seems too difficult to enforce.
During my years as a tenant, I never bought rental insurance and I would have balked at requirements to do so.
I was watching the local TV news a while back, there was a bad apartment building fire here in NYC, over 30 families was burnt out of their homes, shivering on the street. The reporter interviewed them and asked if any had renters insurance, and none has. They contacted the owners who said it's the responsibility of the tenants to be insured.
So the Red Cross had to provide temporary shelter with some of the tenants crying saying they don't know what to do next as they lost everything. Talking about setting up a GoFundMe page. So sad.
And renters insurance runs $10 to $15/month for crying out loud. But as you say, tenants balk at the $10, but in the meantime pay $200/month around here for auto insurance. And in NYC they've outlawed requiring tenant insurance. So at lease signings for new tenants, I stressed we have insurance but NOT FOR YOU as explained in the lease. And I ask them, "do you have mink coats and $1,000 designer shoes?" These are the things that always wind up missing in burglaries, especially for people who balk at $10/month for renters insurance. But after all, it's the landlord's fault for being negligent, for not installing window bars.
Thinking about it, it's personal responsibility isn't it? Maybe it's not so sad.
- Insurance Agent · Atlanta, GA · Member since 2019 · 59 posts · 9 votes6y
Hi all, options do exist in the marketplace where you the landlord buy the renters insurance on a blanket basis. I.e. schedule all of your homes on 1 policy. I work with lots of property managers who offer this in their benefits package to their landlords. If you’d like more details please let me know
- Real Estate Broker · Watertown, NY · Member since 2016 · 1k+ posts · 1k+ votes6y
@Carrie A. - We require it. We had a tenant flood our 4 plex from his 3rd floor unit. His kids stuff toys in the toilet and it overflowed and cascaded down through two units, at 8 p.m on a Friday. We were able to make the claim against his renters insurance and got a check for $20k to repair the damages.
- Investor · Prosper, TX · Member since 2018 · 15 posts · 3 votes6y
Yes, it's personal responsibility. The owners were correct that it was the tenants' duty to insure themselves if they wished. Red Cross and GoFundMe can take care of them.
$15/month is $300 in a year, not a small amount for low income folks.
- Investor · Bayside, NY · Member since 2017 · 1k+ posts · 1k+ votes6y
Originally posted by @Nathan G.:
Yes, it's personal responsibility. The owners were correct that it was the tenants' duty to insure themselves if they wished. Red Cross and GoFundMe can take care of them.
$15/month is $300 in a year, not a small amount for low income folks.
Just out of curiosity and doing consumer research for myself.
Currently, 2BR apartments go for $1,700 and up in my area, and advertised in the $1,700 to $2,000 range. If I advertise such an apartment for $1,750, tell the tenant, if you get renter's insurance, I'll credit you $50/month, and pay me $1,700 net. I underprice my rent a little and I'm happy with $1,700.00. If you were the tenant, would you take me up on the offer, assuming you checked with insurance agents and it cost $10 to $15 month. It saves me the trouble of finding insurance where they let the landlord buy insurance for their tenants.
As you said, tenant will be ahead $300/year, and it's a bonanza for low income tenants, if you look at $300 that way.
- Rock Star Extraordinaire · Northeast, TN · Member since 2015 · 10k+ posts · 16k+ votes6y
Wow, back from the grave! I still have the same position, 2 years later from this post. We recommend it but are not going to evict someone if they don't get it or drop it. I should have noted that we have all single-family homes, so what someone does doesn't really affect other tenants. We also have good insurance, and our deductible is usually pretty close to what the deposit is anyway so there's not a lot we'd be out on a claim on our property - and our insurer is going to abrogate any damages against the tenant anyway, whether they have insurance or not. They may not be able to get much/anything, but they will try. National insurers have lawyers all over the place on cheap retainer that can spit out a couple of claim letters and file in local courts to try to recover damages.
Anyway, bottom line is: if you're not prepared to evict someone for not having or dropping the insurance, it's not enforceable.
Skyline Properties - Investor · Prosper, TX · Member since 2018 · 15 posts · 3 votes6y
@Frank Chin
Lowering the rent and giving the tenant the difference seems more approachable, but still requires some extra steps. And the tenant could cancel the policy any time, unless there is a way to mitigate against this and take punitive action? It's an easier sell to give a rent credit for getting the insurance rather than imposing an additional charge to the tenant. It would feel like a bait and switch on the advertised rent.
I don't know why I said 15/month is 300 per year, it's only 180. Anyway i don't like the thought of forced insurance. In New Hampshire you don't even have to get car insurance. Live free or die!
- Multifamily Syndicator · Houston, TX · Member since 2016 · 1k+ posts · 2k+ votes6y
Yes, this is listed on the Move-In list for all our tenants.
However, enforcing it post move-in is another matter.
- Rental Property Investor · Los Angeles, CA · Member since 2017 · 2k+ posts · 5k+ votes6y
I require it and enforcing it is super easy. It's in the lease that it be obtained before move-in and I must be added as an additional interest. It's also in the lease that if a tenant fails to maintain it, I will purchase a policy on their behalf and charge them an administrative fee. If any renter failed to pay me for this, I would non-renew the lease and take the money out of the security deposit. They can fight me in court if they like.
- Investor · Hillsborough, NH · Member since 2015 · 137 posts · 126 votes6y
I started requiring renters insurance to make my insurance carrier comfortable with the fact that I allow dogs.
The tenants' policies name my management company and property ownership entity as additional insureds.
This way, if the dog bites someone (or anything else happens at the property due to tenant negligence), the renter's insurance steps in first and my insurance carrier is somewhat insulated. Also, while my lease covers me against tenant property losses from wet basement, etc., I'd rather see the tenant covered by renter's insurance than get upset with me if something happens to their prized possessions, even though I am not legally responsible.
@JD Martin - In regards to enforceability, there are options short of eviction. Our lease imposes a fine for renter's insurance that lapses. When I get a notice of pending cancellation, I remind the tenant that their account will be assessed $200 if the insurance cancels, and they pay their premium (which is usually less than $200). Am I going to evict for it? Probably not, but I have never and most likely will never have to because the $200 fee effectively incentivizes compliance.
Over the years, my lease has adopted lots of "fees" that I have never had to charge. I have found that putting a dollar amount to something causes tenants to take it more seriously. People of character fulfill their obligations because they agreed to them, plain and simple. The rest comply because it will cost them money not to.
Here's the insurance provision for anyone interested (if there's a dog, the Pet Addendum increases the liability coverage to $500K):
INSURANCE: Tenant shall maintain Renters Insurance to protect their belongings with personal liability coverage of at least $300K per occurrence, and the policy shall name Landlord and Property Owner as “Additional Insureds”. The policy must cover all occupants over the age of 18. Tenant shall provide Landlord with evidence of such Insurance within 1 week of Lease signing, and annually thereafter upon policy renewal. Failure to keep a Renters Insurance policy in place at all times will be a Lease Violation subject to eviction, and Tenant will incur a $200.00 fee if their policy is cancelled during Tenancy.
Oh, and in case a tenant refuses to pay the fee:APPLICATION OF FEES, CHARGES, & PAYMENTS: Once incurred, all Fees and Charges associated with Tenancy shall be considered part of “Rent”. All proceeds received by Landlord on behalf of Tenant shall be applied to any back rent balance, including amounts originally incurred as Fees & Charges, before any current rent due.
"Sorry Mr. Tenant, but you don't owe me for that fee. You already paid that, but you're $200 short on rent".
Also, although I'm not an attorney, I have been told that including this provision in the lease allows me to include any late fees or other fees in the outstanding balance should I evict (this concern is probably specific to NH). Of course, I'm not dumb enough to submit a Statement of Claim in my eviction filing anyway...
Happy investing,
Troy
- Member since 2019 · 226 posts · 107 votes6y
Originally posted by @Michael Badin:
@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.
I showed both of Michael's posts to my agent of 30 years who carries both business and personal policies for me.....
I require renter's insurance evidence before keys, and require 'named insured' status in the lease language, I should ever entertain allowing a dog, then there has to be a rider for that animal.....
His take: the way I do it means I'm covered for damages to my properties beyond structural and basic 'landlord' coverages including loss of rent in the event some yokel has a kitchen fire, I'm not liable for personal property of a tenant or guests,nor am I liable for any liability situation they should cause. In the event of a dispute over 1st or third party status, all I need to do is file a claim through my master policy and they will subrogate for damages while I fix whatever needs fixing. I have been in battle with tenant insurance companies and their contractor adjusters more than once as a third party...and got my money each time. Fact, no tenant insurer is your friend, and most of the time yours can be adversaries too. Each state has laws regarding how an insurance company must deal ethically with a claimant. Failure to do so is defined as bad faith and has courtroom consequences...ie: punitive damages. I suggest that you visit a local landlord association and find out when they will have their next meeting covering insurance woes and gotchas since your state isn't my state. Be informed.
Oh, and he was wondering why an adjuster had any input beyond assessment of damage. So was I.
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