Rental property insurance

16 Replies

1) they don’t want their tennants who might not be financial secure to lose everything they own. (Both because they’re caring people and because it’s hard to pay rent when you need to buy clothes and a bed.)

2) there’s a chance the renters insurance will pay for damage caused by the tenant

Many reasons, one major one being that if a tenant loses property in a event such as a fire, your insurance likely doesn’t cover their property and if they do not have any recourse to recoup the losses there is a chance that you could face a lawsuit from the tenant. 

As the owner of the property you will need landlord insurance.  your insurance co needs to know it is a rental occupied by tenants (or vacant but will be).  your tenants will need renters insurance to cover their possessions while living in your home.  

The bank you get the loan from will require you to have landlord insurance on the property. You can try to force tenants to purchase renters insurance if you want, but that will shrink your pool of candidates. 

In my experience, the bigger insurers (Nationwide, State Farm, Farmers, etc) aren't really competitive with Landlord Insurance. I ended up getting the best rate by reaching out to a local independent broker who connected me to a company I hadn't heard of, State Auto. The policy is also referred to as a "Dwelling Fire Policy" but has the necessary endorsements and limits required by my lender.

Our lease states that we strongly encourage tenants to get renter's insurance and makes it clear that if something happens, we are not responsible for their belongings. We don't require them to carry renter's insurance because I expect our tenants to be adults and make those decisions for themselves.

@Jose Valdez Renters insurance is good for you for below reasons

1. In case of a property or liability claim, it goes in their records, not yours

2. It is an additional surety for you in case of claim, the tenants does not try to claim from you or your insurance or sue you.

3. Most insurers offering landlord or rented dwelling insurance require tenants to have tenants insurance

4. It costs peanuts to get tenant insurance ( may be $10-20 per month)

5. Any claim going into your landlord insurance will limit your ability to get rented dwelling insurance in future ( most companies don’t offer insurance if you have more than 1 claim)

@Jose Valdez

You will want a landlord home owners insurance. Will be slightly different than normal home owners insurance you’d get if you were living there, but relatively the same and any broker/company would likely do both.

As someone else mentioned, lease should require the renter to provide you proof that they have renters insurance (usually only $100-$200/year) with something like $250k or so liability and you (landlord) named as an additional insured.

Jose, while you are considering insurance options, don't forget to factor in the things property owners may not control.  A friend had the property management company secure a tenant who signed as a single person on the lease; without pets. Per the lease, there was no requirement for renters insurance.  Within a month there was an additional person living at the property plus a full grown pitbull. Sadly, she learned of the additional occupants when the property manager was notified by the person who was bitten by the dog.   The homeowners policy excluded any coverage for dogs of this breed.  Because the the injury happened on her property, the damages were her problem.  Ugh.

The responsibilities of the tenant should be clear in your lease. While I do not allow animals, I do include a clause that if the tenant ever considers an animal, they will be reviewed on an individual basis and they would be required to have a breed specific bite liability policy. This sets the tone for any future conversations and situations.  

I am an advocate for tenant insurance and expect any claim by tenant or guest will get filed on their policy, although the liability limits are low (<50K . Insurance here in FL is astronomical with many large carriers pulling out. Any additional policy (with my LLC as the also insured) is a help.

Good luck. 

We recently started requiring tenants obtain renter's insurance.  We had a 3 year old house get mostly destroyed from a tenant started grease fire.  Luckily, she carried renter's insurance.  Her insurance covered all her personal belongings, which was great for the tenant.  However, it also covered most of the damages caused by the fire, as well as lost rents due to the property not being habitable.  Granted, the coverage was not sufficient to cover the actual cost of the rebuild (mainly due to the increased lumber cost at that time), but the Landlord did not have to file a claim on her insurance, which likely would cause increased premiums. Plus, her insurance would not cover lost rents for 10 months. It was truly a blessing for both the tenant and Landlord.