Renter’s Insurance – Why It’s Important
Ironically it’s not just tenants that don’t understand renter’s insurance but it’s also landlords as well. Here’s why it’s important and here’s also what you need to know as a landlord.
Your insurance covers your property.
Or at least it should if you’re properly insured!
Depending on the type or amount of insurance this covers damage to the property through issues such as fire, flooding, sewer backups, rental income loss and more.
This helps you repair or rebuild your property if one of these issues does occur or provides you potential settlements if you prefer not to move forward with the work or if you wish to do it yourself.
Again the important point of this is it depends on the type of coverages you have. If you aren’t specifically covered for flooding for instance the insurance companies won’t cover you if there is flood damage.
If you don’t have coverage for loss of rental income, you won’t be covered for those losses, so it’s very important to ensure you’re properly insured to protect YOURSELF!
And that’s the important point, your insurance covers you, it doesn’t cover the tenants property and it also doesn’t cover the tenant if they are negligent and were the ones that potentially started a fire.
That is why it’s important the tenant themselves have renter’s insurance so they can cover the potential loss of their personal possessions.
Addressing Renter’s Insurance with Tenants
Now many landlords ask me “When or how do I talk to tenants about their insurance?”
Ideally this is done when you’re going through your lease with the tenant, but it can also be done as a courtesy during showings.
Many landlords make having renter’s insurance a term of the lease. This can be a great way to ensure they are adequately protected (as well as yourself) in case they do cause a problem such as a fire or significant damage due to negligence.
The challenge is depending on your local laws you may not be able to enforce this, so as always learn your local laws and regulations!
I typically walk tenants through renter’s insurance during the lease signing by explaining to them how insurance works and the conversation typically goes like this.
” I just want to talk about insurance with you before we go any further. I have insurance on my property, but my insurance only covers my property. That includes the building itself, the appliances and everything attached or part of the property like doors, cupboards sheds and garages.”
“It doesn’t cover your belongings, your expensive stereo or TV, your computer, your clothes or any of your other possessions. That’s why you need your own renter’s insurance!”
It will cover any losses you might incur, it could cover any costs you might run into if you have to stay somewhere else if there was a fire or flooding and often it will even replace any goods or clothing you’ve lost.”
“And most important, it’s usually quite inexpensive for tenants as it doesn’t cover the building! Because of this I’d recommend acquiring your own insurance a priority right away.”
By this point the tenants usually understand how important it is, but it may still require following up once they have settled in. Just to make sure they actually do follow up!
What Tenants May Need From You To Get Renter’s Insurance
Depending on who the insurer is, often your tenant will now need you to answer some additional questions as well.
This can include the size of the space they are renting, the type of construction of the property, the type of heating, whether there are other attached units (ie up down suites, or whether it’s a condo/duplex) and possibly additional details.
To make providing this easier, you may want to include this information with any tenant packages you provide, and/or you may want to keep the information handy in your property files just for this type of occasion.
You’ve likely already been required to provide this to your own insurance company so it shouldn’t be hard to pull together.
Having an insurance conversation with your tenants can go a long ways towards avoiding a particularly unpleasant conversation if you ever do have major issues as well as pointing tenants towards a bit more peace of mind in their lives.
If you have some thoughts about tenant insurance and how you deal with it, leave me a comment below!
Hi Bill. Another great article. It’s funny because I just got an email from Cozy management saying they will be adding a new feature where tenants can buy renter’s insurance directly through the Cozy platform.
I require my tenants to carry their own insurance policy. Now I can offer the Cozy policy as a convenience plus I will have a record of the policy on the Cozy system so no need to keep a copy.
I carry a DP-3 policy for my buildings which gives me loss of use coverage and full replacement value. I also carry an umbrella policy for good measure. Maybe it’s a bit redundant but I feel like you can never have enough insurance coverage.
Domenick | AccidentalRental.com
Thanks Domenick,
One of the biggest obstacles to helping tenants get their own insurance is to make it easy which is sounds like Cozy is helping with. As with anything, if it seems to hard (usually only because it’s never been explained properly or well enough) people delay or entirely avoid doing it.
Whether it’s buying a rental property, buying a personal residence or even getting renters insurance if there is a simpler way to educate people they will take more action. If Cozy can provide this as part of their program it just makes it easier and better for both the tenants and the landlords so hurray to them.
Insurance has recently become a moving target, so it’s also good to get your policies reviewed every couple of years. With the flooding, fires and other disasters that are affecting the bottom lines of insurance companies many of them are increasing deductibles, rewording fine print and reducing coverages without policy owners fully understanding how it affects them. So while you can never have too much insurance (within reason), it is very easy to have insurance that doesn’t cover what you really need.
Bill
Thanks for that, Bill! I immediately checked with our broker to make sure we had this loss of use coverage, and we do. Then I emailed our tenants. And..they don’t have any!! First time I ever asked, too! It is in our lease as a responsibility but it is not made mandatory. Our broker said there is no law requiring them to have it, but it is naturally recommended!! For example, we could be sued if they do not shovel the walk and someone gets injured. Or if their dog bites someone. Our tenant said they were thinking of getting some in September together with her auto policy, unless I knew of someone, so I gave her another broker’s name who we use down there. We are going down to sign the lease renewal tomorrow. We could add a clause stating proof of insurance is required within 30 days, but as mentioned by another landlord in my group, they can cancel it after if they don’t want it…
Great Kelly, glad it helped you. With an issue like you mentioned where you get sued due to your tenants negligence your insurance should typically cover it, but then they will go after the tenants, which is why it’s important they have insurance!
Having a pocket referral like you do to send people do is another way to convince them to get insurance and it helps people you know so it’s a win win.
Bill