If you’re struggling to understand the importance of renters insurance, remember Marie.
Marie was excited to move into her new Brooklyn apartment with her two best friends. Two stories with a backyard—a highly coveted living space sure to be an oasis of reprieve from the noisy NYC life bustling just blocks away.
As the movers unloaded her furniture, she happily unpacked boxes. She hung up clothes, decorated the walls, and set up all her tech. Finally, a place to settle into and call home.
However, less than a month after moving in, Marie came home from work to find burst pipes above her bedroom flooding her room.
After a frantic call to her landlord, her landlord promised to fix the pipes by the end of the week. But Marie just lost all her belonging—how would she replace such an expensive loss?
Why Should Landlords Require Renters Insurance?
Renters insurance is valuable to landlords because it ensures the tenant’s property is protected, minimizes their cost towards property damages as a result of tenant negligence, mitigates coverage disputes (i.e., who pays for what) if the tenant’s possessions are damaged or stolen while on the property, and reduces landlord’s liability in legal claims if a tenant’s guest is injured while visiting.
A random leaky pipe during a regular workday can quickly spiral to flood damage—forcing you to spend thousands of unexpected dollars!
Here’s the good news, if you can call it that: If Marie’s landlord required her to get renter’s insurance, her stuff would be replaced. We recently surveyed landlords on RentRedi and found only 33% require their tenants to get renter’s insurance. Another 30% require it based on the rental home.
Honestly, you might be thinking, “I’ve asked my tenant for a security deposit, rent, and now another bill to add to their list!” Here’s the thing—most renter’s insurance policies start at $8 per month.
Related: The BiggerPockets Guide to Landlord Insurance
Benefits for landlords
Of course, should any damage, theft, or loss occur to the rental property, the landlord has their own insurance that provides coverage. Renter’s insurance is another layer of protection. And landlords benefit when their tenants are insured, because it:
- Protects a tenant’s property if damaged or stolen
- Provides protection to the tenant in case of a natural disaster
- Mitigates issues with pets on a property
- Helps keep insurance premiums low.
Even though a renter’s insurance lease policy is not always enforced—and rarely does it lead to a case for evicting a tenant—it’s still important for landlords to follow through on making sure a tenant has purchased renter’s insurance for the landlord’s sake as well.
For landlords, requiring renter’s insurance is legal. This requirement can be incorporated into any new lease or at renewal.
Why is renters insurance necessary if the landlord already has insurance?
This is a common misconception amongst renters. As noted above, a landlord’s insurance does not cover a renter’s personal possessions or liability. So it’s important for tenants to protect themselves and their belongings from damage and theft.
Let’s look at a few different scenarios all covered by renter’s insurance:
- You return home from a holiday dinner at your friend’s house to discover a burglary.
- Your attempt at baking the perfect sourdough goes awry and starts the kitchen on fire. The flames covers everything in smoke—damaging your unit and the neighbor’s.
- A visiting friend trips over the cord you have running across the living room.
To put it in a simple way: Everything the renter owns or could be liable for is covered by renter’s insurance, including clothes, furniture, and even the tenant and their visitors.
Everything the landlord owns (i.e., the rental, storage sheds, etc) and could be liable for is covered by their insurance. This includes the rental itself, any dwelling on the premises used for the rental, such as a shed or garage, and faulty building structure. Landlord insurance policies cover the cost of repairs for property damage and structural damage not caused by renter negligence.
Benefits of Renter’s Insurance for Tenants
Renters insurance can seem like a guaranteed snoozefest with little value or reward to tenants… until they unlock the door to their newly-rented apartment and find the place flooded. Or their stuff stolen. Or a guest trips over their rug and sues for a broken arm.
However, renter’s insurance provides much-needed protection for tenants and their belongings, offering coverage:
- If personal property, such as pricey jewelry, is stolen, lost, or otherwise destroyed
- Against lawsuits if the tenant hurts someone or damages someone else’s property
- For reasonable medical costs if someone injures themselves in the tenant’s unit.
How much does renters insurance cost?
As mentioned above, renters insurance typically starts at $8 per month. That number may increase based on the size of the property, the number of personal belongings or requested replacement cost, or even the location.
Renters pay other costs, too. Almost all insurance plans have a deductible, which can range from a couple of hundred dollars to $1,000 or more. Tenants will have to pay this deductible before the plan covers any losses.
Your policy’s limits may determine how much your insurance company will pay, too—and can increase the cost. Make sure to choose a plan that will pay out enough to cover your most valuable possessions.
Related: What Landlords Should Know Before Evicting a Tenant
What Does Renters Insurance Cover?
Let’s dive deeper into what renter’s insurance covers.
Personal property coverage
Insurance covers possessions against theft, loss, and other forms of destruction. Some policies even extend coverage for property damaged or stolen outside the rental unit. So if you have expensive electronics, like a laptop, stolen at a coffee shop, your renter’s insurance plan will help with replacement costs.
If a guest is injured while in the tenant’s unit or they accidentally damage someone else property, their insurance’s liability coverage helps with reasonable medical expenses and protects against lawsuits.
Related: How Much to Charge for Rent in 2021: A Landlord’s Guide
Loss of use and additional living expenses
Should the tenant’s unit become uninhabitable by a covered event (i.e., fire or flood), renter’s insurance helps cover temporary housing and living expenses.
However, the precise policies and price will vary by state, tenant, and even by insurance companies. Research different plans and policies that will best suit each renter’s needs.
A renter’s insurance policy is beneficial to both tenants and landlords. It offers a myriad of financial and legal protection to both parties. When landlords require renter’s insurance, property management software like RentRedi can be a valuable tool for transparency into whether or not a tenant has purchased renter’s insurance and ensure tenants and landlords can easily store and share the documents for reference.
Do you require renter’s insurance? Why or why not?
Tell us below.
This post is sponsored by RentRedi.