When renting a property to tenants, you may ask yourself if it's okay to require your occupants to purchase renters insurance. This can be an unexpected expense for them, and you may wonder if making it a requirement is worth the risk of losing good renters.
However, in simple terms, having this type of coverage is beneficial for both real estate investors and tenants. When beginning rental real estate investing, it’s essential to know the implications of requiring renters insurance for your properties. This blog post will explore why landlords may require renters insurance in the residential lease agreement or rental agreement and the many benefits both landlords and tenants experience when renters have this coverage.
Can a Rental Property Owner Require Renters Insurance?
Yes, residential and rental property owners can require their tenants to purchase renters insurance. While a lease agreement would typically include this requirement, it’s also important to make it part of your tenant criteria and inform potential renters about it during the screening process.
The primary purpose of requiring renters insurance is to help renters protect their belongings if damage occurs to them during the tenancy. When renters have the coverage they need, they are less likely to try to sue property owners if their property becomes damaged, stolen, or vandalized while living on the property.
Plus, when renters have coverage to protect their belongings, a property owner can have more confidence that they are responsible and likely to be good tenants. Many landlords include it in the residential or rental lease agreement for the reasons listed above.
What Are Some Benefits of Renters Insurance?
Many renters fail to see beyond the extra cost of purchasing renters insurance, but property owners should require it anyways. While this type of coverage is different than landlord insurance and does not protect your property if something goes wrong, it’s critical coverage that every renter needs!
If you are considering whether or not to require renters insurance, here are some of the key benefits to tenants that can encourage your renters to obtain a policy.
Covers a Renter’s Personal Belongings in the Event of Theft
A good renters insurance policy covers the renters personal belongings in case of theft. Suppose an occupant’s personal belongings are removed unlawfully during a break-in. In that case, they can file a claim with the insurance company and receive reimbursement for the value of the stolen items. This can be a lifesaver if they have a lot of valuable possessions.
With coverage, tenants are also less likely to hold a property owner responsible for not protecting their belongings.
Covers Costs of Temporary Living Arrangements
Another essential benefit of renters having renters insurance is that it covers the costs of temporary living arrangements for your tenant if your home is uninhabitable. This can be helpful if your rental property is damaged in a fire, tornado, or other natural disaster and your tenant needs to find somewhere else to live.
Provides Liability Coverage in Case of Personal Injury
Depending on the coverage, renters insurance may pay for injuries within your rental property—even if the injured person is not your renter. This can help eliminate your liability if someone falls or gets hurt while visiting your resident in the property.
Having the right coverage can help your tenant avoid paying for medical expenses that may arise if a guest becomes hurt.
When not required by law, residential property owners often consider offering discounts on the rent to tenants who maintain ongoing renters insurance during the tenancy. This incentive can help renters be more open to maintaining a policy throughout the lease term.
Where Should Investors Disclose a Renters Insurance Requirement
Property owners must understand the details of a rental lease agreement and what is required from owners and renters. If you decide to require all residents to have a renters insurance policy, it is essential to include clauses about it in the residential lease agreement. This will help ensure that both parties know their rights and responsibilities regarding this type of coverage.
As we mentioned earlier in this blog, ensuring a fair and legal screening process is critical for rental real estate investing, so property owners must also disclose this requirement in the criteria when listing a property.
By failing to include a clause about renters insurance in your lease agreement, you could be opening yourself and your real estate investments up to liability if something goes wrong and your tenant does not have coverage.
Use Privy to Find Your Property for Rental Real Estate Investing
Even though property owners can’t purchase renters insurance for their residents, requiring it can help protect properties and investors from potential lawsuits and unforeseen expenses. We hope you found this information helpful as you build your portfolio with rental properties!
If you are an investor looking for your next big rental property investment, Privy can help. Using our software algorithm and platform means you have a tool that scours the MLS in multiple markets to find the perfect rental properties for your needs. Our platform is easy to use and can deliver the right property to you in no time. Reach out soon to learn more about the Privy Advantage!
Need more insights about creating legal lease agreements? Download our free resource, “The Ultimate Guide to Lease Agreements.”