Many renters may assume that if their personal property is damaged inside their rental unit or stolen, the landlord's insurance will cover it. While your insurance may cover physical damage to the unit from fire or other disasters, it is best to require renters to have their own renter's insurance. Renter's insurance is relatively cheap, costing between $15 and $30 a month, depending on the amount of coverage your tenant wants. Renter's insurance can be bundled with many auto insurance policies also.
It's important to consider making renter's insurance a part of your lease requirements and here's why.
1. To Avoid Lawsuits
If your tenant's belongings are damaged or stolen, or if someone they have over should get hurt on the property, and they don't have their own renter's insurance, there is a good possibility they will try to hold you responsible in some way. By requiring renters to have their own insurance, you will reduce your chances of ending up in court and having to pay for something you shouldn't.
2. To Weed Out Bad Tenants
As mentioned earlier, renter's insurance is very inexpensive. If applicants or current tenants complain they can't afford to have it, that is a sign they may not be financially stable enough to make monthly rent payments. After all, renter's insurance is for their protection, so if they are unwilling to obtain it, that's a bad sign.
3. To Lessen Your Responsibility
Imagine a worst case scenario: one of your rental properties has a horrible fire, and burns down. At this point you may feel responsible for temporary housing for your tenants. In some states this is required anyways, but if tenants have renter's insurance this will be taken care of by their insurance company. This reduces stress on you as you deal with the damage to your property.
4. To Cover Your Deductible
If by chance a fire was caused by your tenant, your insurance will cover the cost to repair the damages, but you would first have to pay the deductible. If you require your tenants to have renter's insurance, their insurance would cover the deducible, thus relieving the financial strain on you.
5. To Give You Peace of Mind
One of the best reasons to require renter's insurance in your lease is to give you peace of mind. Rather than worrying about every possible situation that could go wrong, you rest assured knowing that if there is an emergency, both you and your tenant are covered. This will also make for a better relationship with your tenants.
Rather than considering the alternatives, make the decision to require renter's insurance on all your leases. It's the best protection for you and your tenants.