Why require tenant to have renters insurance?

Question

Curious as to why you should or should not require tenant to have a renters insurance policy? What is the benefit to the landlord?

Ann Bellamy · Answer

Two additional reasons:  If you allow dogs, the renters insurance will cover liability in the the event of a bite.  In addition, I had a suicide in my building years ago.  My insurance company went to the tenant's insurance which then covered my deductible.

Jason Bott · Answer

Josh, it simply moves some risk off of the landlord and onto the tenants Renters Insurance policy.

I just had a client where the tenant had a large kitchen fire.  The tenants Renters insurance covered the claim for $160,000, keeping this claim off of the landlords policy.

If this claim would have been on his portfolio policy, he may have seen a premium increase over the next few years.

Aaron DiCaprio · Answer

The renters policy will provide coverage to the tenant and reduce some risk of having them file a claim against your insurance.  You should also have a property and liability policy covering your investment.  There are several insurance products specifically tailored for investors.  And you might want to consider rent default insurance at some point.  Good luck!

Joe Splitrock · Answer

I have read through renters insurance policies and they primarily cover personal property. Cost depends on amount of personal property coverage, but it is usually $20k to $30k. It does not cover the structure. That is what landlords insurance is for. There is usually liability coverage included in a renters policy, which typically caps at or below $100k. You will need to prove tenant negligence to get them to cover something like a fire and even then there are limits. I am not saying it won’t help the landlord but there are limits.

Taylor Roeling · Answer

@Josh Miller Good question! There are lots of reasons to have renters insurance - mainly to protect you and your property that you most likely have spent a lot of money and time to invest in. While it is not legal in all places to require renters insurance, in the locations it is legal, it can be a wise decision. Insurance will help keep your home protected from tenant related accidents and it will also benefit your tenants greatly. They will be protected from theft, destruction, and loss of property, leaving both you and your tenants with greater peace of mind! Hopefully, this helps. It's better to be safe than sorry as a landlord!

Karen F. · Answer

We have it in the lease, but are too lazy to enforce it.  Recently, a tenant who was (unbeknownst to us) running an unlicensed auto repair business out of the driveway of the multifamily he was in, had a car he was working on catch fire in the driveway right next to the house.  Fortunately, the fire department arrived quickly, and put it out.  The only damage was to the siding and a couple of windows.  We could have gotten our insurance to cover it, to reside the entire house, but we knew our premiums would skyrocket.  Of course tenant hadn't obtained renters' insurance.  We wound up residing that wall of the house on our own.

Could have been a lot worse.  We really should enforce it.

Steve DellaPelle · Answer

@Josh Miller Here in MA it is very common to see frozen pipes burst. Having Renters Insurance covers your personal items (up to a certain amount) and takes the liability off the Landlord.

Imagine having a burst pipe and a resident claims $10,000 in damages. If they don't have Renters Insurance who do you think they will go after?

Josh Miller · Answer

Thank you for the responses. I have it in my lease and was questioned and just wanted to have some additional input.

Adam Gollatz · Answer

Seems like a pretty simple answer, am I missing something in the question?

Benefit to the landlord - tenant has an insurance policy that claims can get filed against, so they dont get filed against your homeowner/landlord policy. Policies vary, but there are also benefits to the tenant as well (covers their belongings, protects against theft, covers their assets in the event they have enough to get sued, etc) if you market to a higher clientele of tenant, it should be an easy sell to get them to pay 100 bucks a year for it.

Why require tenant to have renters insurance?

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