Why Requiring Renter’s Insurance Is a Good Idea
I am a property manager in the greater San Diego area. Should I require my tenants to purchase renter’s insurance before they sign the lease? Why is requiring renter’s insurance a good idea?
Most homeowners are aware of the benefits of taking out a homeowner’s insurance policy on their investment. If you plan to lease out your home as a rental property, your homeowner’s policy might not be enough.
While renter’s insurance is not required by law in California, or any other U.S. state, as a landlord you have the right to require anyone who signs a lease to carry a renter’s insurance policy. This will benefit you just as much, if not more than it will benefit the tenant, and is a great way to protect both your investment, and your financial security.
Covers the Loss of Personal Property
In the event of a disaster, a tenant’s personal belongings could become damaged or destroyed. This could be due to anything from flooding or fire damage, to theft of the tenant’s property if the home is broken into. Renter’s insurance will cover the cost of repairing, or replacing personal belongings with no cost to the tenant or landlord. This aspect of renter’s insurance is by far the most appealing to tenants.
This coverage also extends to any costs that might be incurred in the event that the property becomes unlivable, such as a natural disaster, or a total loss of the property due to fire. The policy will pay for temporary housing for the tenant, such as a hotel stay, as well as costs associated with relocation.
Most renter’s insurance policies also carry what is called liability coverage. Accidental and unintentional damage to the property caused by the tenant, or one of the tenant’s guests, would be covered under this policy.
For instance, if a tenant forgets to turn off the stove and causes fire and smoke damage to the property, renter’s liability coverage protects both the renter and the landlord from shouldering the burden of the repair costs.
Perhaps even more importantly, liability coverage also covers accidental injury to persons on the property. In the event that a guest falls down the stairs, or twists their ankle on a loose stone while on the property, the landlord will not be held responsible for any ensuing medical expenses.
Mitigates the Threat of Lawsuits
As a landlord, the greatest asset of renter’s insurance is the peace of mind that you will not be held responsible for any accidents, damages, or loss of property that might occur while the tenant is inhabiting the property.
If a person becomes injured, or personal property is damaged in the home, there are some scenarios where the tenant could sue. If the landlord is found liable for damages, not only will you have to pay any incurring expenses out of pocket, but this will cause your insurance premiums to rise significantly.
Low Cost to the Tenant
One of the most appealing aspects of renter’s insurance is that, for the benefits included, policies are extremely affordable for most tenants. According to the Insurance Information Institute, the average annual premium for renter’s insurance in 2018 in California was $178.
And if there are still some issues in taking care of the property well, you can work with a real estate property manager to help vet through your applicants and ensure that your property is thoroughly insured.