15. RENTERS INSURANCE FOR YOUR TENANT
As the owner or real estate, YOU aren’t the only one who needs insurance. Your tenant needs renter’s insurance to protect both him and you.
You should REQUIRE your tenant to carry renter’s insurance and that the landlord (owner and management company) be named as an “ADDITIONAL INTERESTED PARTY” on the policy. Do not allow the insurance company or the tenant to have you listed as ADDITIONAL INSURED. You should also require the tenant to provide proof of such insurance coverage prior to occupancy.
Here’s why:
1. If your property catches fire, through no fault of the tenant, the owners insurance does not cover the tenant’s personal property or any expenses they may incur while the property is being repaired. Who do you think they might sue if they have no other protection?
2. If your tenants cause their neighbors to suffer a loss, through bodily injury or property damage, their Renters Insurance will provide protection that would compensate the injured party. This protection can prevent arguments over liability between you and your tenant, and who do you think the neighbors might come after if they can’t get relief from your tenants?
3. If someone sues your Renter for monetary damages for some other reason, and they haven’t done anything illegal, their Renters Insurance puts Insurance carrier money on the table and as the landlord you don’t need to be involved.
4. Your tenant’s personal property is protected (less the deductible) while they are away from home, like in their car, or when traveling. If they lose something that is valuable to them (maybe their super-duper computer or a professional grade video camera that they use to earn a living) they may have to replace it out of their own pocket, and that leaves fewer resources to pay your rent.
5. If they choose to purchase renter’s insurance from their existing auto insurance carrier, they will likely qualify for a discounted premium, perhaps on both policies. Depending on how expensive their auto insurance is, their Renters Insurance might even be FREE!
6. A typical policy covering up to $15,000 in property damage and $300,000 in liability coverage costs about $10 to $15 per month. Some policies include property damage in the liability coverage amount.
Renters insurance typically covers your tenant and their personal property: things like their computer, camera, stereo system, clothes, sports equipment, cell phone, tablet, TV, and more.
It even protects things outside the rental property. If your tenant loses his laptop after locking it in his car, he’s covered. His rental insurance policy can help him replace it. Same goes for his things stolen or damaged at the gym, at the coffee shop, or while visiting a friend.
And if the rental property is damaged by fire or vandalism, for example, your tenant is probably going to need a place to live while repairs. Renters insurance helps cover the cost of a hotel room and other additional living costs.
As the owner, you maintain insurance on the property that protects the building itself, but that policy won’t include anything the tenant brings into the building with him. That’s where renters insurance steps in.
Renters coverage from places like Esurance, State Farm and Allstate provides protection for around $10 to $15 per month.
What does renters insurance cover?
Not all renters policies are the same. But in general, renters insurance can cover:
Personal property
According to research by Esurance, the average renter owns about $20,000 in personal property and is 25 percent more likely to be burglarized than someone who owns a home.
Personal liability:
If your tenant is sued because someone was hurt in the rental home or because the tenant (or someone covered under his policy) accidentally injured someone, renters insurance can provide liability coverage for legal costs. The limits of that personal liability coverage vary, so make sure you require at least $100,000 of personal liability coverage.
Medical payments:
The renters policy can also help cover medical payments up to a certain limit if a guest or visitor is injured on the property — though it generally doesn’t cover injuries to the tenant or other household members.
Property damage to others
Renters insurance coverage for your apartment or house follows your tenant wherever he goes, so if he accidentally breaks or damages someone else’s property, his renters insurance policy can help pay to replace it.
More and more landlords are REQUIRING renters insurance as a precondition of a lease agreement. If you do this, require that the insurance company name you as an additional insured under their policy, and provide you with proof of coverage.