Renters insurance, also known as HO-4 insurance, is a packaged insurance product for rental tenants. In addition to protecting tenants against property and liability damages, renters insurance also covers the cost of provisional living arrangements if your rental property is rendered temporarily uninhabitable.
Can Landlords Contractually Require Renters Insurance?
Yes, landlords can include a lease agreement provision that requires tenants to purchase and maintain renters insurance. However, if you intend to incorporate a renters insurance clause in future lease agreements, make sure to contact your current tenants to inform them that the rental requirement will come into effect when they renew their lease.
If state laws affect lease modification, speak to a legal expert about including renters insurance as a contractual obligation in your lease agreement. After implementing the lease update, schedule annual checks on insurance activity to make sure your tenants aren’t letting their renter's insurance policy lapse.
Renters Insurance From a Landlord’s Perspective
If you own a rental property, reducing the number of claims on your insurance is a top priority. Fortunately, requiring your tenants to purchase renters insurance creates additional coverage safeguards for property investors.
Protects Against Lawsuit Actions
Added protection against litigious action is one benefit of requiring your tenants to hold renters insurance. Without this requirement, landlords are more exposed to lawsuit risk from disruptive tenants.
For example, if tenant property is damaged or stolen, unscrupulous renters may file a lawsuit against you under a claim of landlord responsibility. Likewise, if a liability event takes place and the tenant involved is without renters insurance, any hospital or legal expenses will be claimed against the landlord.
Minimizes Relocation Responsibilities
Landlord responsibilities can be stressful and time-consuming at the best of times. If a rental property is vacated due to unexpected events, such as a fire or gas leak, landlords are typically responsible for organizing and financing tenant lodging. However, if your tenants hold renters insurance, temporary relocation will be coordinated and covered by the tenant’s insurance provider.
Filter Unreliable Tenants
The requirement for renters insurance must be clearly laid out on both your rental listing and lease agreement. Remember, applicant complaints about compulsory renters insurance can factor into your final decision. If a potential candidate cannot afford low-cost renters insurance premiums, it is a good indicator that they are living beyond their means.
Renters Insurance From a Tenant’s Perspective
Requiring renters insurance is beneficial for both landlord and tenant. To help get the message across, we’ve listed three benefits of renters insurance that your tenants can get behind:
Affordable Property Coverage
Renters insurance is a very affordable insurance product, with monthly premiums costing between $15 and $30. In some parts of the country, tenants can secure basic renters insurance coverage for as little as $5 per month.
Extended Property and Liability Coverage
Personal property coverage is a poorly understood concept amongst renters. If your tenants do not hold renters insurance, they will not be covered if their personal belongings are damaged by fire, flood, or theft. Renters insurance also provides liability coverage for your tenants if a family member, bystander, or friend are injured due to unsafe or negligent tenant behavior.
By requiring tenants to get renters insurance, landlords may be inclined to adopt a more pet-friendly attitude. This is because renters insurance coverage hedges against the increased liability and risk of damage incurred by tenants with pets. Remember, high-risk pets, such as poisonous snakes or dogs with an aggressive history, are not typically included under renters insurance coverage.
Need Further Clarification? Get in Touch with An Experienced Agent!
If you’re planning on investing in a rental property for the first time, a good first step is to contact a local, full-service real estate agent. Buyer’s agents in the Clever Partner Network will not only break down the different insurance options available to rental property investors — they’ll guide you through the entire process of setting yourself up as a landlord, from marketing and insuring your rental property to structuring and signing tenant agreements.