While landlords generally have insurance on their rental properties, most do not encourage their tenants to purchase renter’s insurance. But renter’s insurance can help protect your tenants’ property and may even shield you from liability.
Renter’s insurance generally covers the items that are within a dwelling. For example, if a windstorm blew the roof off of a landlord’s property and your tenant’s television was damaged, the landlord’s insurance policy would pay to have the roof replaced. But the tenant’s television set probably would not be covered by the landlord’s policy. However, if the tenant had renter’s insurance, it would likely cover the TV.
In addition to providing coverage for the tenant’s belongings, renter’s insurance would also cover their stay at a hotel while the roof was being repaired. If the time needed to repair a dwelling before it is habitable again is lengthy, this type of coverage can save your tenant a lot of money.
Renter’s insurance is also useful for certain tenant liability problems. For example, if it is the tenant’s responsibility to maintain the walkway outside of the property, and someone is injured on this walkway, the tenant — not the landlord — may be liable for this accident. Renter’s insurance would cover a claim resulting from an injury on the premises as long as the tenant was responsible for the upkeep of that area.
If your rental property is located in an area with a high crime rate, it is especially important to encourage your tenants to purchase a renter’s insurance policy. It will cover any personal items that are stolen from their rental property. However, if your property or neighborhood has a history of problems, such as repeated break-ins, it may be difficult for your tenants to get an insurance policy.
Renter’s insurance works much like a regular home insurance policy. There is a monthly or yearly premium as well as a deductible. Some renter’s insurance policies feature lower monthly premiums in exchange for a higher deductible.
Once your tenant has decided on a deductible amount, he or she will need to figure out the actual dollar amount of coverage they want. This amount should cover all the tenant’s essential belongings, or as much coverage as the tenant can reasonably afford.
Renter’s insurance typically provides two methods of reimbursement. Actual cash value coverage will pay the actual value of the personal belongings. For example, if your tenant purchased a television set for $399, but the depreciated value is $200, they would receive $200 back on a successful claim.
The other type of reimbursement is replacement cost. This type of coverage provides enough money to purchase a new replacement. Returning to our television example, if your tenant purchased a television set three years ago for $399, and a new comparable television set now costs $499, they would receive $499 to purchase a replacement with a successful claim.
Even if your tenants do not feel that their personal items are worth insuring, they should consider the benefits the liability coverage may offer. One injury on a part of the property that they are required to maintain could result in bankruptcy for them. It is much easier to pay a monthly premium than to contend with a property negligence lawsuit.
In the end, it will be up to your tenants to decide if renter’s insurance is right for them, unless you require it as part of the lease.