Why do you think you should require your tenants be insured?

Question

So whether you are renting to families, individuals or businesses, it's important as a property owner to require your tenants carry liability insurance. Why you might ask?

Well there are several reasons for this. A simple one is to help protect your assets from the risk of lawsuit. An easy example of this is that your tenant owns a dog know to you to bite and you did not try to have the dog removed. The dog bites a visitor to your apartment building. The tenant carries no renters insurance (which includes liability coverage). So, the injured party sues the landlord as well as the dog owner. The courts will decide what happens, and this varies by state,  but had your tenant carried insurance, they would likely absorb most of the claim, if not all of it.

Second example. Your business tenant with whom you have a lease agreement, and it requires you be named as an additional insured on their commercial general liability policy, has a slip and fall accident in their store. The customer who slipped and fell files suite against you as the landlord. Since your lease requires the (business) tenant carry a commercial general liability  insurance policy , and that it names you as an additional insured on a primary and non contributory basis, you tender the suit to your insurance policy and that of your tenant. The tenants policy will respond for you, so as not to adversely affect your policy, in most cases.

While I'm not an attorney, nor play one on TV and this is not legal advise. It is good sound practice. Additionally, many insurance companies who provide insurance to landlords require written lease agreements, no smoking requirements, liability insurance from the tenants and many prefer a no animal building.

Questions?

Lynn McGeein · Answer

In Virginia, it's actually written into the landlord tenant laws that landlord can require a renter's insurance policy and actually purchase one and charge the tenant if tenant chooses not to purchase one, as long as total cost of security deposit and renter's policy equals less than 2 months' rent.

Marc Winter · Answer

We manage 300+ units, and we require ALL tenants to have (and maintain) renter's insurance before we give them the keys--binder faxed from their insurer is proof.

The owner and we as managers are indemnified, and we receive notice from insurance carrier if tenant is ready to lapse.

During the last 20 years we were named in a suit 2 times.  Both frivolous, but did require attorney, which insurance covered.  Both amounted to what I refer to as 'legal blackmail' where the attorneys settle out of court because it is less costly for the insurer than continuing to trial.  We had a $50K suit turn into a $2k settlement--after 4 years!

Insurance is a net positive for the tenants, in case of theft, accident, fire or flood damaging their personal property, etc.  More tenants/renters have break-ins statistically than homeowners.

Jack Smith · Answer

@Nathan G. very true. My post is about recommendations and mainly for small landlords in NY. Often here, even in the larger buildings landlords are requiring it as well as to be named as an additional insured on renters policies, especially in NYC.

There are considerations for those smaller landlords that just may not pertain to those of your size or in your territories.

Thanks,

Nathan Gesner · Answer

I don't require it but I strongly recommend it to every tenant.

First, I don't know anyone that's ever been sued. I've asked the question of BP users and members of NARPM and don't recall anyone saying they've been sued.

Second, the amount of work required to track it. Maybe a private Landlord with a few rentals could handle it with little effort. For me, I don't want 300+ pieces of paper, 300+ annual renewals, and dozens of violations to deal with.

Third, enforcement is difficult, at best. Courts have ruled the Landlord can't force the tenant to purchase insurance. Even in a Landlord-friendly state, I'm not willing to force it in court so why bother?

I know managers with thousands of units that don't require renter's insurance and I know others that do. Each person has to decide what they want to spend their time on.