Do you ask your renters to get insurance?

Question

In my most recent property the tenant had so much stuff with her and the area has some issues. I put in the lease that i asked the tenant to get renters insurance which she agreed to but i never asked for confirmation. Is this something you all do... ?

Kevin Romines · Answer

I would advise that you always require a renter to get a renters policy for a couple of reasons. Typically the monthly premium amount ranges between 7-18.00 per month depending on contents coverage, fire district rating and the tenants credit.

What does the tenants renters policy do for you the owner / landlord? It creates a additional  layer of protection for the liability in your policy. The 1st coverage that comes into play would be the tenants policy, and your coverage would then be secondary.As you know, you really dont want claims on your policies if you can help it.

As far as proof, you should put a clause in your rental policy that requires them to add you as a certificate holder. By doing this, you will be notified if their policy ever lapses. This comes directly from the insurance company, so your not dependant on the tenant for updated info.

Many of the larger metro apartment companies now require renters policies and to be added as certificate holders for these very reasons.

Michael B. · Answer

I don't.

Renter's insurance is a poor tax and I don't encourage my renters to pay poor taxes. I don't encourage renters to take out payday loans. I don't buy trip insurance when I travel nor do I buy the extended warranties on digital cameras. And for the same reason I don't encourage renter's insurance.

On most property and casualty lines the claims ratio is in the neighborhood of 70%. With renter's insurance it's about 30%. The rest goes to insurance company overhead & profit.

It's overpriced for what protection it offers and just doesn't provide much value. Most people can find serviceable replacement for their stuff for $1,000 on Craigslist.

The basic rule for insurance is that if you can afford to take the loss you don't need insurance. And since 2nd hand furniture is so cheap it's not hard to be able to absorb the loss. So there's usually little value for the premium charged.

Tim Norris · Answer

60% of property claims are caused by tenant negligence.   If they have renters insurance, you at least have a chance to recoup damage/your deductible. Without the liability coverage their policy would typically provide, the chances to recover such loss is minimal.

Bryan L. · Answer

I think it's a good idea.  Most renters are clueless anyway, and most don't know that their stuff is not covered in the case of fire or whatever.  Most will not actually get a policy, but you have at least informed them.  You also need to check with your local landlord-tenant law.

Michael B. · Answer

Peter, cheap insurance products are rarely worth the money. Some people swear by extended car warranties, others would never buy a TV without the extended warranty. To others the thought of not having full coverage on a 6 year old car is unthinkable. My own dad, with a net worth in excess of $1 million when he died had a $6,000 life policy for burial expenses when he died at 84. At times they're right. They do pay off on occasion. But that's not the way to bet.

Cheap policies have too much overhead to be of much value to the buyer. I do the opposite in my rentals. I try to keep tenants from spending on bad ideas so I can capture a larger wallet share.

Jean Bolger · Answer

I strongly suggest to my tenants that they buy insurance, and explain (in the lease) that they're not covered by my insurance. What many of them don't realize, until they're told, is that if they buy from the same company that issues their car insurance it can end up costing them next to nothing because it can activate a "multi-policy" discount on the car insurance. In some cases it even saves them money!

Michael B. · Answer

So, Joe, if you don't like my numbers what are yours? Mine were pretty close about 5 years ago when I moved from being an actuary for the guys in Columbus, OH to a job in retail analytics. I'm guessing they haven't moved much.

Name another line with such a low claims ratio AND low variance of claims. Lines like flood and earthquake have low claims ratios, but the variance is very high, making them good consumer deals.

Actually I think you're confusing claims ratios with expense allocations. The small payments, small claims, and high churn make these difficult to deal with for the company, and not particularly profitable. But from the consumer point of view such a small amount  paid in claims still makes it a bad deal. Even if the claims ratio is all the way up to 35% now.

Peter Stroup · Answer

Michael B I disagree.  Renter's insurance is inexpensive and every tenant should have it.  I have in my leases a requirement that the tenant must get renter's insurance and provide me with proof.  If there is a fire or break in the tenants go to their insurance rather than try and go to mine.  I've had tenants get robbed and they were glad they had the insurance.

Joe Bertolino · Answer

Michael B,  I couldn't disagree more.  Even if your tenants can replace everything for $1000 (which I highly doubt)... wouldn't you prefer for any damage they cause to be collected from their renters policy (either directly or through subrogation) rather than through your landlord policy (which should have high limits and high deductibles).   Also,  your estimates on the loss ratio for renters insurance is way off.  It is a line of business that carriers prefer to avoid but state DOI's won't let them write homeowners without writing renters insurance.

Brian Burke · Answer

I don't typically allow pets in my rentals but if I make an exception and the tenant has a dog, I require them to carry renter's insurance with a significant liability limit and name me as an additional insured.  Aside from that, I don't require tenants to obtain renter's insurance.

Do you ask your renters to get insurance?

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