According to Forbes, many tenants don’t think that they need renters insurance or may be completely unaware of what it is. It is possible that tenants do not understand the collective value of their possessions. Equally, they could assume that the protection of their possessions is under the responsibility of the investor/landlord, or may not be aware of what renters insurance is. Regardless, it is important that property investors make their tenants aware of renters insurance or even require it before the signing of a lease.
Here, we breakdown why property investors should encourage and educate their tenants on renters insurance, as well as providing an easy, downloadable guide that can be given to tenants.
What is covered by renters insurance?
By having renters insurance, tenants can be protected against the following:
- Personal Property – In the event that any of the tenants personal property is lost or stolen (such as clothing furniture and electronics), they will be covered by their renters insurance.
- Personal Liability – Should your property or anyone else’s be damaged (such as broken windows or items inside the property), the tenant will be covered once the deductible amount is met.
- Additional Living Expenses – If the property is deemed inhabitable due to damage caused by a natural disaster, the tenant will be covered against the cost of finding and living in alternative accommodation and travel costs associated with the move.
By being protected against such instances, tenants can stay in a stable financial position which will put investors and property owners at ease.
How are investors and property owners protected?
The First Line of Defense for Landlords
According to East Insurance Group, if your tenant or renter damages your unit, your landlord insurance may cover for these, depending on the kind of policy that you have. Generally, there are three kinds of tenant damage. Normal wear and tear, intentional, and accidental damage.
Accidental damage is sometimes shouldered by landlord insurance. When filing for an accidental damage claim, you still need to meet your deductible. But, if your tenants have an existing renters insurance policy, you might be reimbursed under their liability insurance coverage. This could cover property damage from tenants.
Intentional damage, also known as malicious damage, this is sometimes shouldered by landlord insurance. This may get confusing since vandalism is shouldered in many insurance policies. Vandalism is one of the most common intentional damage carried out by tenants, but several insurance companies treat it differently. However, this doesn’t mean that you don’t have any resource. You can confiscate their security deposit or file a lawsuit.
Wear and tear is not covered by landlord insurance or homeowner insurance. Wear and tear include the likes of stained carpets and broken fixtures. Your best resort is to get the tenants security deposit.
Injury and Medical Expenses
According to Policygenius, a renters insurance policy will also cover costs you may be legally responsible for paying if someone is injured in your property. If someone slips, falls and is hurt on the premises, your policy’s personal liability and medical coverage will cover the cost of potential medical bills.
If that person decides to sue you for their injuries, your liability coverage will pay for some legal expenses that you accrue from the lawsuit.
A renters policy can protect property damage to others that you’re deemed liable for. If a broken pipe in your apartment flooded your neighbor’s residence below, your insurance policy should cover damages to their property, too.
By ensuring that their tenant and their possessions are protected, the property owner can breathe easy knowing that such responsibilities will not fall on their lap. This transparency and understanding between both parties can ensure a healthy relationship and a successful lease.
In considering the financial magnitude of investing in real estate, property investors must take every possible action to protect that investment. By doing everything they can to ensure only ideal tenants are staying in their properties, it only makes sense to take an additional step and amplify the importance of their tenants having renters insurance.
The laws surrounding property management and renting can often be complex. As a result, it would be beneficial to give tenants a simplified breakdown of what renters insurance is and why they need it. Here, we have create a simple guide for tenants that explains what renters insurance is, what is covered, and why they need it. You can download that PDF here!