Landlord insurance covers the landlord’s personal belongings and the landlord’s building and liability but doesn’t cover any belongings of the tenant who is renting the house, duplex, or other building from the landlord. As a landlord, requiring your tenant to purchase renters insurance can ensure that your tenant is protected in the event of damage that may occur that happens to destroy some or all of their personal belongings.
While your tenant may see it as a bit of an annoyance to be required to purchase renters insurance, you are helping the tenant have their belongings protected by requiring the coverage. In this article, we discuss how much renters insurance a landlord should ask tenants to get in order to be properly insured.
- The tenant should obtain enough renters insurance to fully protect the value of all of their belongings.
- Requiring renters insurance also protects the landlord, by keeping the tenant whole and happy.
- Requiring renters insurance also protected the landlord from some potential lawsuits that may arise as a result of damage to the residence that ultimately causes damage to the tenant’s belongings.
How much renters insurance should a landlord require?
It makes sense that a landlord should require a tenant to get enough renters insurance to ensure that the total value of their belongings and their financial well-being are covered. If the tenant has $10,000 worth of belongings then the landlord should require $10,000 worth of renters insurance. The landlord should also require at least $100,000 worth of personal liability coverage and at least three months’ worth of loss of use coverage. Having all of the above will set the tenant up well when disaster strikes. It will give the tenant the financial ability to figure things out for a period of time without the pressure of having to drum up some money from somewhere to survive. While the tenant may think this coverage unnecessary or excessive, this is the bare minimum that the landlord should require to keep the tenant whole and happy in the event that disaster strikes. The tenant will be grateful for having the above coverage when disaster does occur.
Sometimes tenants have a dog or other pet of some sort. They may also have a trampoline or something else that might attract unwanted attention or be another cause of damage or injury. In these cases, it would be wiser for the tenant to require more than $100,000 of personal liability coverage. Somewhere in the $300,000 to $500,000 range would make more sense or maybe even more. Whatever the amount ends up being, both you as the landlord, and the tenant should feel confident that the tenant is completely covered so that no potential issues or lawsuits arise.
The benefits of requiring renters insurance as a landlord
Not only does renters insurance protect the tenant, but it also sort of secondarily benefits the landlord in a number of ways as well. Without realizing it, tenants can have quite a high dollar value worth of belongings with them when they move into a rental property. When disaster strikes it can be a significant cost to the tenant to replace or repair items that may have been damaged. I think both tenant and landlord can agree that both want the tenant to be awarded the dollar amount to repair or replace all of their belongings as quickly as possible. A landlord would also most likely agree that they want the tenant to be made whole without any expense to the landlord while the tenant is still paying rent to the landlord and the two parties are on good terms. These are the benefits of renters insurance for landlords. Let’s break them down a bit.
Protect both parties’ finances
Requiring a tenant to obtain and maintain renters insurance protects their financial well-being as well as yours as the landlord. It can be a major financial burden on the tenant if a covered peril were to cause damage to the rental property that ultimately damages or destroys the tenants’ personal belongings. Renters insurance will step in to reimburse the tenant for their damaged personal belongings, which will give the tenant the financial ability to replace their damaged property without having to dip into their reserves or sell other assets or even stop paying rent in order to do so. This will leave both parties happier when a disaster does occur.
The other financial benefit to both parties is that the renter’s policy can pay for the tenant’s temporary relocation and added living expenses that may be incurred while repairs or rebuilding are being completed to make the rental property habitable again. This will keep the tenant from having to incur additional costs while keeping the landlord with rental income coming in.
Protect the landlord from potential lawsuits
Renters insurance can be crucial to keeping a landlord protected from a lawsuit when a disaster occurs. Damage to the tenants to the personal belongings could be the result of something going haywire in the rental property itself, for instance, a pipe bursting that floods the property. Without renters’ insurance, the tenant’s belongings would not be covered at all and there is a good chance that they will be upset that their belongings are destroyed as a result of the place they are living in. This may lead them to turn the blame on the landlord. This same scenario could also take place if the tenant or a guest of the tenants on the property became injured as a result of the property itself. You as the landlord could all of a sudden see a lawsuit headed your way with potentially huge legal bills and a possible award out of your own pocket to the tenant. It is simpler to require the tenant to purchase relatively inexpensive renters’ insurance to make the tenant whole in either of the above scenarios. You will more than likely be able to avoid any issues with renters’ insurance.
Summary
Requiring renters’ insurance is not just good for the tenant, it is also good for the landlord. Requiring renters’ insurance will leave both parties happier in the long run.
