Do you require tenants to carry renters insurance?

71 Replies

My insurance agent says I can require my tenants to have renter's insurance. I run a pretty tight ship as far paperwork and managing my properties, but this is one area I maybe failing in. I appreciate any thoughts here?

@Todd Powell Hi Todd. I’m currently dealing with a major catastrophe in my 2 family , and despite my recommendations, no one is carrying renters insurance. Now the home is not liveable, and everyone is looking to me to solve their problems. If they had insurance, they could go to a hotel or anything and it’d all be fine. So I’ve learned my lesson the hard way, and from now on i will require it. Hope my tale of woe helps with your question lol. Good luck!

Yes. 100% yes. It's super cheap and provides a ton of protection to both you and the tenant. When a claim comes in, do you want the strike against your policy or theirs?

Make sure that they add you as an Additional Interest (not Additional Insured) to the policy. That way you are notified if they change or cancel the policy.

@Greg M. What type of claims would be covered using your tenants coverage ? I really need to learn more about this. Thanks !

I manage 300 rentals and I do not require renters insurance. I recommend it to every tenant, but don't require it.

Here's my question: if the tenant lets their policy lapse or cancels it, are you going to evict them? Do you think a judge will allow you to evict them over a $15 insurance policy?

I don't think it will fly and I don't want to spend the time necessary to enforce it or fight with tenants over it. I know managers with thousands of units that require it and I know managers with thousands of units that don't.

YMMV

@Todd Powell for what it is worth on our One SFR, we do require it and it is written into the lease that they must carry it. Now, do I have a copy of it? No...should I, yes. When we have a tour over we will add in that me, the owner needs to be added as an additional insured so I am notified if they cancel it. Just more CYA.

Yes, I "require" it. It's in the lease. However, I do not require them to give me a copy of their insurance. So, do they have it? Maybe. 

@Nathan G. No, I would not evict, but several companies out west here do require it. Its also in my Oregon lease paperwork stating it as a requirement @Kelly I.   My agent told me I should make them as per Oregon law, but I would not enforce or evict, but it would sure protect if its an industry standard, so I ask the question to see what others are doing.

In my experience, about half of the property managers require it and the other half just recommend it.

They damage your property or HOA property that you are liable for, their insurance will cover it instead of filing a claim on yours. Their actions make the unit uninhabitable and they move out. You use their insurance to cover the lost rent instead of yours. Their dog bites a neighbor and the neighbor includes you in the lawsuit since you allowed a "vicious" dog in the building. Renters insurance covers this. They fail to tell you the toilet leaks and you find this out because the neighbor below your unit has water damage. You let their renters insurance deal with it instead of yours. Their policy is the first line of defense against claims that may come after you.

I always require renters insurance and put it in my lease that the renter is to indemnify me against claims for their actions and those of their guests.

@Todd Powell I recommend it to my tenants, and make sure they’re educated about why it is beneficial. Don’t require it though.

We've recommended Renters Insurance for years and have provided tenants with a brochure about the benefits of having it.  However, we only began requiring it of new tenants last year. Haven't taken the time to verify if any or all of our tenants actually have it. 

Spoke with our insurance broker and indeed it's important for the landlord to be listed at an "Additional Interest". I understand the average policy costs about $120 - $180 per year for liability coverage, personal property coverage, and additional living expense coverage (in the event the unit becomes uninhabitable) for our two bedroom/one bath units.

I would enforce it the same way I enforce other terms, such as the requirement for tenants to establish and maintain utility accounts in their name. If a tenant doesn't respond favorably to us reminding them of the terms of their rental agreement and asking them to comply, then we would proceed to serve a 10-day "Notice to Comply or Vacate", which is the appropriate document for this situation in our jurisdiction.

Originally posted by @Kelly I. :
@Todd Powell for what it is worth on our One SFR, we do require it and it is written into the lease that they must carry it. Now, do I have a copy of it? No...should I, yes. When we have a tour over we will add in that me, the owner needs to be added as an additional insured so I am notified if they cancel it. Just more CYA.

 Hi Kelly!  Here's a link to an article that explains the difference between "additional insured" and "additional interest".  Maybe you just typed the wrong term by mistake or maybe you weren't aware of the difference. Hope this helps!

https://www.effectivecoverage.com/800/additional-i...

@Todd Powell Great discussion! We require it for our tenants and we are also notified if it cancels. With that said, it is written into our lease and we did threaten eviction to a tenant over it earlier this year. Honestly we would not want to evict over this but they were just playing games so I needed to show them we were serious. They got the point and promptly picked it up within 24 hours. From my perspective they we’re testing us and if we let that slide what else would we let slide, if that makes sense. If in doubt talk to your insurance agent and see if it makes sense. Daniel

I'm surprised that anything can hit your personal insurance that would normally be covered by renters insurance. Renter's insurance is for personal property and personal liability, and there should be no overlap in coverage. If there's a fire, your homeowner insurance pays for all the repairs to structure, appliances, flooring, painting, windows, etc. But it shouldn't cover your tenants TV set, clothing, furniture. Their renters insurance is for that.

Legally, you're usually not required to pay for alternative living arrangements in the event of a disaster, or moving expenses either. But that part may vary from place to place.

I require it and it is written into our lease that it is required. With cozy, you can see that they have it. Whether or not they keep it or have it is up to them. I can give you two examples when it was needed. 

An upstairs toilet leaked onto a downstairs tenants bed. I replaced it because they were good tenants. If I had required it then, I wouldn't have felt the need to do so. 

One of my rentals had an electrical fire in the attic the day the tenant was moving in.  I told them I would see what I could do about getting them a place to stay because the house was uninhabitable. When I called my insurance company, they asked about renters insurance which I did require at the time of these tenants moving in. Their renters insurance would have put them up in a hotel but mine would not. Their friend also expected me to put him up in a hotel because he was helping them move from out of town. They were yelling at me as they were telling me to help them. Can you imagine the hotel bill I would have paid while the house was being repaired? It wasn't my fault the house caught on fire, I wasn't even there. But somehow , it is always the landlords fault. I am very glad that I required it on my lease. They didn't have it , and unfortunately, they had to find  place to stay after that, but I wasn't required to pay for it. I did have to pay the mortgage those three months though, which was difficult enough. 

@Marcia Maynard thanks! Honestly I didn’t even know there were two different desIgnatIons. You are rIght that I would want to be lIsted as Interested party Thanks for sharing the article. On another note - I am working my way through all the BP podcast and look forward to listening to yours!

My son's landlord charges for it in the lease, does all the paperwork for them, and then all they (the tenants) need to do is sign it.  I might start doing that, as then I know it's done and I know I'm listed as Additional Interest.

This is all very helpful information. Thank you guys I had not even thought about renter's insurance. I'll probably just recommend it though. My properties are in Texas which is a landlord friendly state so I shouldn't run into many legal issues of that sort.
@Todd Powell our leases here in suburbs of Chicago mandate it under liability clause - so yes. I prefer it. But you can’t control them cancelling it. Don’t really care if they do anyway.
@Todd Powell Yes 100%. My tenants do not get keys until they have shown proof of insurance. If they have pets, insurance must cover them as well. It is written in all lease agreements that they are required to maintain renter’s insurance during tenancy.
@Daniel P. Sounds you run your business well. Getting the impression about half of the landlords actually enforce or require. My lease state its mandatory but I dont endorse. Good discussions here and will also pass along to my son @Jason Powell
@Todd Powell correction, I endorse but do not ENFORCE. I am now rethinking after all this info. Thanks everyone for your insightful input!
@Leopoldo Vazquez My properties are in Texas, and I require renter’s insurance. You protect your property, why shouldn’t they protect theirs? If they don‘t care about their possessions, what makes you think they will care about yours? If their belongings are lost, stolen or destroyed, where do you think the money to replace them will come from? (Your rent). If their dog bites someone, you want their insurance to take the first hit, not yours. Landlords are easy targets for lawsuits - why put yourself in harm’s way? Plus, the coverage for alternate accommodations would be a lifesaver if called into use. Being named as additional interest makes sure you are notified if the insurance changes or cancels. All in all, renter’s insurance reduces your risks at no cost to you. Why would you NOT require it?

@Bill Crow I feel like down in south Texas (border towns) nobody requires it and people would be offended if you do, but then again renters insurance is one of those cheap extras you can throw in and they just rather pay it than keep looking for another property. I'm definitely taking it into consideration. 

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