I purchased the PA Landlord form from BP as we are getting ready to rent our first duplex. In it is a section on Indemnification insurance, 20.B for those of you that have it. I read this section as the tenant needs rental insurance and includes a box for an amount that they may have no less than.
My first question is am I reading this correctly and it just says the tenant must carry renters insurance? If that is indeed what it is saying, Why would I care how much their policy is for? Is there a standard amount that people use?
Overall this is the tightest lease I have read so far and it was well worth the purchase price. This was the only section i was unclear about.
This is a requirement for the Renter to purchase their own "Renters" policy which protects their personal property and liability risks. Your landlord policy does not protect the tenant or the tenants property from any losses.
Why require the tenant to have this? Imagine these scenarios...
If there is a fire, smoke damage, water leak, toilet over flow, burglary, etc and the tenant's property is damaged - do you want them looking for you to pay for their stuff?
If there is fire, smoke, water, or storm damage to the unit and they are forced to move out while repairs are being made - the Renters policy will pay a set amount of money towards their temporary residence (hotel) until they can find a more permanent place to live or you are ready to have them move back in. Otherwise you may be asked to pay for their temporary lodging.
If you allow pets and their dog bites someone - do you want your landlord liability to pay for that persons injuries? You still may be held liable anyway if you knowingly allow them to keep a dog with a bite history.
If the tenant has a guest over doing keg stands and the bust their head open or the guest trips on a skate board, slips on a banana peel, or whatever - do you want the guest to sue you or the tenant?
Renters insurance is fairly inexpensive in most parts of the country costing something in the neighborhood of $10 to $25 per month (some big cities can be expensive).
If you find a smaller or new in business local agent they would probably jump at the chance to be your referral source for your tenants to get Renters insurance.
Big outfits or long time agents may not be as interested in being your go-to as the commission is fairly low and the level of service on these policies can far outweigh the commission. Whomever insures the property for you now would probably be the best place to start.
Basically what @Michael Norris said. In most cases, I ask for around $100k in coverage. Have an insurance broker on standby who can process this requests quickly.
Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.
Thank you, @Michael Norris I certainly understand the importance of renters having their own insurance. I was unclear what the standard amount to require them to maintain would be.
I saw $1Million in one post in my search which did not sound right. @Chris K. suggestion of $100k seems much more reasonable.
I think a common standard is 30,000 persona l property/100,000 liability, and is what I require in new leases.
@Mike Conklin Ok I see what you were asking - others on here could share what their lease requires but I'd say like most insurance things there is no one size fits all option (which thankfully keeps me in my day job)
From my experience the tenants that don't see the value of renters insurance are going to whine about having to buy it anyway so you might as well set it at a level you are comfortable with.
The difference in cost to the tenant to have higher limits is typically very small.
**fine print - Individual results will vary by the individual tenants credit profile, zip code and claims history....
Here is an Ohio example of someone I quoted last week - $15k in property, $100k liability, $1k deductible premium was $187 year / $16 month.
Increasing Property to $30k and Liability to $1 Mill the total premium is $275 year / $23 month.
Move that person from a Cleveland city zip code to a Columbus city zip code and the cost of the policy could be almost double - but with the overall higher cost in that area the relative difference between the lower coverage and higher coverage would still be very minimal.
The agent who insures your building should be able to give you some examples of rates in your area.