Why Landlords Should Consider Mandating Renters Insurance
The majority of renters don’t have renters insurance. Some people don’t even know it’s a possibility. However, renters insurance is one of the few insurance policies that are both affordable and pays off when needed.
Just like property owners are required to carry homeowners insurance to get a mortgage, there are several good reasons tenants should be required to carry renters insurance.
Renters insurance protects a tenant’s belongings.
Most renters don’t realize how expensive it will be to replace stolen or damaged property until it happens. A tenant’s property is often worth far more than they realize. For example, replacing a guitar or a laptop computer can cost thousands of dollars. Buying a renters insurance policy for less than a couple hundred bucks a year would easily cover those and larger items.
Tenants without insurance often need to scrape their savings account and save money for a while to replace simple items. Tenants with renters insurance, however, don’t need to scramble to replace their belongings.
The danger to you, as a landlord, is that tenants who don’t have renters insurance might sue you if a problem in the house causes their property damage. For example, if the septic system backs up, pipe bursts, or the roof caves in during the rainy season, your tenant could sue you. If the courts find that your negligence contributed to the burst pipe or busted roof, you could be ordered to replace your tenant’s belongings.
When you require your renters to carry renters insurance, you don’t have to worry about your tenant suing you for damage to their property during a plumbing disaster or any other kind of problem. You’ll have peace of mind knowing you’ll avoid this kind of legal problem.
Renters insurance will provide temporary housing.
In some states, landlords are required to provide temporary housing for tenants if there’s a problem preventing them from living in their rental unit. For example, if the sewage system backs up into the home and the damage is severe, you might be legally required to put your tenant up in a hotel.
How would you respond if your tenant asked you to pay for their hotel room while fixing the problem? Most landlords wouldn’t feel great about being asked to spend hundreds or even thousands of dollars. However, a renter who knows their rights won’t have any problem taking you to court to recover their expenses.
On the other hand, a tenant with renters insurance won’t need to call on you for accommodations during an emergency. Relocation will be covered by their insurance policy. The accommodations may not be five-star hotels, but they’ll have a place to stay, which means they can’t ask you to pay for their temporary hotel.
You’ll attract more high-quality tenants.
High-quality tenants tend to have renters insurance, while bad tenants can’t be bothered to spend the money. While this isn’t a rule across the board, generally speaking, requiring renters insurance will help you weed out potentially bad tenants.
High-quality tenants care about their belongings and won’t be opposed to getting an insurance plan to rent from you. Bad tenants will have all kinds of reasons for not getting a policy. For example, they might say they can’t afford a policy.
Since renters insurance rates are low, it’s a bad sign when a potential renter says they can’t afford a policy. If someone can’t afford renters insurance, it’s a sign that they’re living paycheck to paycheck, which might lead to late rent.
Some good tenants will be opposed to carrying renters insurance, especially if they’re minimalist and don’t have possessions worth protecting. For example, if the most expensive thing someone owns costs $1,000 or less, paying for insurance doesn’t make sense. Especially if their furniture came from thrift stores and they don’t have many material possessions. However, requiring renters insurance is a great way to filter out potentially bad tenants.
Require renters insurance moving forward
To mitigate a potential lawsuit, require all tenants to carry renters insurance. You can’t afford to get dragged to court by a tenant who wants to hold you responsible for damage to their property.
Courts tend to favour renters over landlords and are highly sympathetic to tenants in distress. If a court has any reason to believe your negligence contributed to the issue that caused property damage, you could be out thousands of dollars.
If your tenants object, remind them that it’s a small price to pay for peace of mind during situations outside their control.