Renters Insurance: How do you explain it to the tenant?

[Daniel Mendez]

Good afternoon,

I am renting out my first property and it seems like it is important for me to require renters insurance from the tenant.

What would you say to a tenant as to why having renters insurance is a benefit to them? Or what does it protect them from?

[Greg Scott]

Easy peasy.  Here are a number of things you could say.  (FWIW, be sure you have them add you or your entity as additionally insured.  That way if they cause a loss, their insurance covers your deductible.  Also, you get notified if they cancel the insurance.

1) Because it is a requirement  In other words, you cannot rent this unit if you don't have insurance.

2) As a landlord, our insurance does not cover your items.  Your insurance covers your stuff. If there was an issue, such as a fire, wouldn't you want all new stuff?

3) If there is a major issue at the property such that nobody can live there, it is expensive to move and you need time to find a place.  Insurance will usually put you up on a hotel for a few days to get settled.

[Theresa Harris]

Simplest explanation is if something happens (eg a fire), your insurance isn't going to cover any of their belongings or temporary accommodation.  I'd also get proof of their insurance and say it must be active for the duration of their lease...and write rental insurance as part of the lease, so if they cancel it, you can get rid of them.

[Nathan Gesner]

I agree with the others. Your insurance does not cover the tenant's belongings. If they want protection, they need their own insurance.

Mandating tenant insurance protects you. They will get a $100,000 liability to cover fires, water damage, accidents, and more.

As @Greg Scott stated, you should require your tenant to add you as "additional insured" on their policy. This means their insurance policy will cover you on any claims made by the tenant. And if the tenant tries to cancel their policy or misses their payment, you'll be notified. Some carriers won't allow the landlord to be named "additional insured" but you can at least be named "additional interest," which won't cover you under the policy, but it will ensure you are notified of any changes or cancellation of the policy.

[Jay Thomas]

Renters insurance is a good way to protect your rental property and help your tenants. It covers their possessions and the lifestyle they desire. It protects personal items from fire, theft, or water damage and even includes liability insurance if someone gets hurt while staying at the rental. This small expense gives tenants peace of mind, knowing their things are protected and they will get financial help after an accident or crime.

[Rachel Degutz]

Does needing renter's insurance apply to people renting out my garage to store cars? Or does their auto insurance cover this?

[Michael Norris]

Tell them it's mandatory.

Make sure you are named as additional insured to protect your interests but also if they let the policy lapse you will get a little post card in the mail from Lexus Nexus or a similar company saying the policy is lapsed or canceled.

For those that allow pets - have them get a renters policy that does not have a dog bite or dog breed exclusion. This has saved a few of my landlords from having to claim the dog bite liability on the landlord policy EVEN IF THE DOG BITE OCCURS OFF PREMISES.

I would not recommend having your tenants get their renters policy from the same agent/company you have your landlord policy from. In a disputed claim situation your agent, who you may need to advocate on your behalf, may be stuck in between two clients - the tenant and you the landlord. 

You can say that's not fair, why would you be held liable for the dog bite etc and most people would agree with you. It doesn't matter - You as the big bad rich landlord have a target on your back and will be named to the lawsuit and your insurance carrier will rush to settle it quickly and then you'll be dealing with the long term challenges of having that claim in your insurance history. 

In the past 24 months two of my landlord clients have been saved from having to make a dog bite claim on their policy because the tenants had a renters policy that did not have the dog bite/breed exclusion. It's a real pain to enforce but it's worth it.

The majority of carriers right now have a loss rule on new business that varies but goes something like this... they will not accept your new policy if you have a loss in the last 3 or 5 years. Some of them have said the rule only applies to specific types of loss others are saying it's any paid loss. 

[Wesley W.]

Quote from @Rachel Degutz:

Does needing renter's insurance apply to people renting out my garage to store cars? Or does their auto insurance cover this?

My understanding is that vehicles being stored can only be coverd by an auto insurance policy.  Best to get a direct answer from your insurance carrier, however.

[Owen Rosen]

Quote from @Rachel Degutz:

Does needing renter's insurance apply to people renting out my garage to store cars? Or does their auto insurance cover this?

 Depends what we're trying to cover.  Coverage for those vehicles?  They need proper car insurance and they need to indicate to their insurer where the cars are garaged/stored.

[Matt Moore]

I require it and don't explain it. Be sure to get a copy at each lease renewal. The best way to manage it is to use a property management system that sells it as part of the leasing process. This makes it easy for them and thus decreases the likelihood that it becomes an issue.

[Adam Bartomeo]

In some state you cannot require them to have renters' insurance so know your local laws. As everyone else has said, if there is any loss to the tenants' belongings no matter who is at fault your insurance will not cover it. Your insurance only covers what you own.

[Clare Pitcher]

Everyone has stated some very important points! To make it easy for the owner we typically add this sippet to the onboarding email: 

- "Please add us as additionally insured to your insurance policy. This should be a simple request to your insurance agent, but feel free to include us in the email to them in case they have questions. Copy and paste below to make it super easy. 

Need insurance? We know a few of those. A) Hey Insurance Agent, I'm hiring COMPANY NAME to manage my rental property. Please add them as additionally insured to my policy. Their address is XXXXX  53214b) Great Insurance Agents - NAME - EMAIL of insurance agent"

For a tenant, you can let them know that renters insurance is very cheap and they can easily bundle it with their home and auto for only a few extra dollars month to protect their items if anything were to happen i.e. natural disaster .