Should I Require Renters Insurance?

As a rental property owner, you undoubtedly know the importance of carrying insurance for your own property. However, do you require your tenants to have insurance? If you don't, should you? 

First, you have to check with your local laws and regulations before requiring renters insurance. It is not always legal to do so. If it is legal in your state and city, then it is extremely wise to require it or provide your tenants with information about carrying renters insurance. Many plans start as low as $15/month, so it is not out of the reach of most renters.

When The House Burns Down

Ultimately, your renters will benefit the most from having insurance. They will be protected from theft, loss, and destruction of their property. However, you as a landlord will also benefit. Think about it like this. If your tenant has an accident that results in your rental home burning to the ground, you will use your insurance to cover the costs. However, you will owe your deductible. 

This is where renters insurance can come into play. If your tenant has renters insurance, you could have your deductible covered by their insurance plan. If they don't have insurance, there is slim to no chance that they will be able to pay your deductible.

No Savings = No Money For Catastrophe

Did you know that most renters have little to no savings? On average, according to Harvard's Joint Center for Housing Studies, renters have a median cash savings of $630. This meager number means that when disaster strikes, your tenants are unable to afford the burden of any large costs.

Better Relationship With Your Tenants

Another fringe benefit of requiring renters insurance is that it will actually foster a better relationship between you and your tenants. When your tenants have renters insurance, they are less likely to try to pass the blame off for any damages or issues at the rental property. They are more prone to handling things when their insurance plan covers costs. 

Check With Your Laws

If you are interested in requiring renters insurance, check with your local regulations first. If it is legal in your area to require renters insurance, implement this policy with new tenants and include language in your lease that dictates this requirement. You can ask for proof of insurance from tenants at the time of signing the lease in order to enforce this regulation. Not only will this protect you and your tenants to a greater degree, it will also help you weed out irresponsible tenants. If someone isn't willing or capable of purchasing renters insurance, they might be an application you'd like to pass on regardless.

What about you? Have you required renters insurance from your tenants?