Landlords have their work cut out for them, especially if they manage multiple properties and have a number of rowdy tenants. While landlord insurance offers quite a bit of protection, it may not shield you from all liability.
This is why many landlords require their tenants to purchase renters insurance. This is a good way to reduce liability, mitigate possible expenses from damage, and avoid potential problems with tenants.
However, renters insurance is a personal policy held by a tenant. So can landlords legally require it? Here’s if and why you should require your tenants to purchase it as a condition of the lease.
Is It Legal to Require Renters Insurance?
The short answer is yes. Landlords are legally allowed to require renters insurance on a rental lease agreement. You are able to require a minimum amount of coverage as well; however, the lease condition must require that all tenants purchase renters insurance.
Since this will be an added cost to your tenants, you want to be as upfront about this policy as possible. You should go over these stipulation with the tenants in person before signing the lease. This will ensure that they understand the requirements.
Although some tenants may be unhappy about this policy, requiring renters insurance is a good idea. It will legally protect both you and your tenants from possible damage and personal liability.
How Are You Protected As a Landlord?
Renters insurance offers a number of benefits to you as a landlord. Here are a few good reasons to add the lease agreement.
For one thing, a difficult or untrustworthy tenant may be unwilling to purchase this insurance. So, if a potential tenant complains about the stipulation, you may want to view this as a red flag. If they won’t be able to afford a cheap renters policy, then the tenant may not be financially ready to rent the property in the first place. In short, you may be able to filter out bad tenants from the start.
It also minimizes your own personal liability and protects your property in general. Accidents happen and the property could be damaged at some point. If something like a fire, break-in, or other unexpected event occurred, then renters insurance can help mitigate the cost of repair alongside your own insurance if needed. It can also help expedite the repair process.
It also may reduce the chances of a lawsuit. If tenants are suing over damages to personal property in an accident, then renters insurance may be able to cover these damages entirely in the first place.
On top of it all, a renters policy can help maintain a positive relationship with all of your tenants. You might save time from bickering about who should have to pay for what. It can streamline the discussion and path forward when problems occur. If there are no problems, then you may have a better chance at reducing renter turnover as well.
How Are Tenants Protected?
Of course, renters insurance doesn’t just benefit you; it also benefits your tenants. This is true even if they don’t seem excited about purchasing the policy in the first place. Many tenants may not be aware of the benefits afforded by some of the best renters insurance policies.
This was already mentioned, but renters insurance will protect their belongings from damage. Most renters insurance policies will cover them from damage due to natural disasters, a fire, or theft. It also reduces their own personal liability from damages. This is a huge protection for a tenant.
Additionally, renters insurance can protect tenants when someone is injured on the residence. For instance, let’s say one of your tenants has several people over for a party. One person is injured and doesn’t have health insurance. A renters policy can protect your tenant from possibly being sued or reduce liability in the event of an injury.
The only real downside of renters insurance is the added costs to the tenants – especially if they live through the lease with a clean record. However, not every tenant can get through the year without problems. If you consider the protections and perks, renters insurance is well worth the price.
If you’re managing a large number of tenants, then requiring renters insurance may be an absolute necessity. It’s the best way to protect yourself, maintain a healthy relationship with all of your tenants, and make sure they have the protection they need.
By Andrew a Content Associate from Lendedu – a website dedicated to helping consumers with their finances. Andrew has been happily paying into a cheap renters insurance policy for several years.