How to Ensure Tenants Get Renter's Insurance

Question

We have historically had in our leases that renter's insurance is required, but we had been lax on enforcing it because owners didn't really care and not all tenants had it. We are now beginning to crack down more as some insurance companies for property owners are asking for copies of all renter's insurance policies to issue liability coverage on properties.

Aside from having in leases that renter's insurance is a requirement, how do others actually enforce the tenant getting it? Do people require it before signing the lease? I feel like that sounds simple but in reality would hold up the leasing process for tenants that are not proactive.

In order to encourage tenants to get renter's insurance, we have been contemplating instituting a $50 monthly fee until they provide proof of renter's insurance with the owner listed as an additional insured, but not sure how well that would hold up if we ever had to evict.

Nathan Gesner · Answer

As JD said, the tenant must list the landlord as "additional interest" on the policy. This ensures the landlord is notified any time the policy is changed, canceled, or renewed, making it easier to track without relying on the tenant.

The difficult part is enforcement. If the tenant cancels their policy, are you willing/able to evict them? Unlikely.

The backup plan is to have a strong lease. If the tenant fails to establish their own policy, enroll them in your renter's insurance policy and charge it back to them. If they fail to pay, then you can choose to try eviction or just hold the charges until the end of their lease and collect it from their deposit.

JD Martin · Answer

We require proof of insurance before move-in day, and we are listed as additional interest in case they cancel. We have it set up where they can upload their proof on a regular basis right in their online tenant portal. It's one of those things where if you are going to require it, you have to be prepared to evict for not getting it. Years ago we didn't require it and just recommended it to the tenant, but it's so cheap and gives our insurer something/someone to abrogate against should we have to make a claim that we don't allow it to be optional anymore.

Nathan Gesner · Answer

You can require them to have insurance, but you cannot require them to purchase from a specific policy provider. They have the choice of finding their own insurance or they can be automatically enrolled in my master policy.

Brandon Larson · Answer

Yea, @Nathan Gesner is that legal to enroll someone in an insurance policy and then charge them for it? That definitely sounds illegal. Please correct me if I'm wrong.

Nathan Gesner · Answer

Sorry I wasn't more clear. I don't think you can purchase a policy for one tenant, but you can create a master policy for all your units. I have a master policy with default coverage for all my renters. If they purchase their own policy, I enter their information and cancel my policy for that unit. If their policy ever lapses or is canceled, they are automatically enrolled in my master policy and covered.

Another benefit: three friends renting together typically need their own policies. My policy covers every tenant named on the lease for one price.

Brandon Weis · Answer

@Nathan Gesner on your section where you say "The backup plan is to have a strong lease. If the tenant fails to establish their own policy, enroll them in your renter's insurance policy and charge it back to them. If they fail to pay, then you can choose to try eviction or just hold the charges until the end of their lease and collect it from their deposit."

Can property owners or property managers enroll a tenant in a renter's insurance policy and charge it back to them? I may be incorrect, but I thought that was not a possibility. If it is, we may just do that from the beginning in order to not rely on tenants to do it themselves.

How to Ensure Tenants Get Renter's Insurance

How to Ensure Tenants Get Renter's Insurance

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