Renters insurance is financial protection for a tenant’s personal property and liability. A renters policy also contains loss-of-use coverage, which pays for them to stay elsewhere if their rental home becomes uninhabitable. Many landlords require their tenants to purchase renters insurance before moving in. Landlords do this in an effort to minimize their own risk and to avoid potential legal conflict.
Since renters insurance covers a renter’s personal property, there won’t be any debate over who has to pay for their damaged belongings. Common risks like fire, smoke, vandalism, and theft are all covered perils in a renters insurance policy.
That said, by requiring tenants to buy renters insurance you are adding an extra step for them in the leasing application process, which could potentially turn them off from the idea of renting your property. So, can you just do it for them? Can landlords buy a renters insurance policy for their tenants?
Should I buy renters insurance for my tenant?
You cannot legally purchase a renters insurance policy in your tenant’s name. Renters insurance is tied to individuals, not the physical properties where those individuals live. Renters insurance is protection for a renters property, not a landlords. That said, it does benefit landlords when tenants have financial protection.
It’d also be impossible to buy a renters insurance policy for someone else because in order to purchase a policy, you need to prove what’s called insurable interest. Renters insurance policies are also personalized, so how much coverage is needed would vary from tenant to tenant. When someone buys a renters insurance policy, they are buying financial protection for their own personal property.
How much personal property coverage they need depends on the total value of their home inventory. Since the policy would be for your tenant and not you, your tenant will need to take a home inventory of all their belongings to calculate their total value. The same goes for liability coverage or medical expenses. Renters insurance companies also check credit scores of the person applying for the policy, which again varies from renter to renter.
If you want your tenants to have renters insurance, you should require it in your lease. If you want to help your tenant pay for their renters insurance policy, you can. You can also help them apply for renters insurance if you want, but you cannot buy it for them.
Partnering with insurance companies
Some property management companies partner with insurance companies to offer their tenants renters insurance. These insurance companies offer discounts to their “members” so your tenants have the option of essentially purchasing a renters insurance policy “through” you. This type of partnership is more common in big cities and large apartment complexes that are run by property management companies.
Can I require my tenant to buy renters insurance?
You can require your tenant to buy renters insurance in order to be eligible to rent your property. If you want your renter to have renters insurance, requiring it in your lease is the easiest way to go. That way your tenant knows ahead of time that this is a caveat to renting the property.
It’s a good idea to require renters insurance so you are not liable for a tenants belongings and you don’t have to deal with a tenant trying to get you to reimburse them if their personal property is damaged. Renters insurance covers your tenant’s personal belongings if they are damaged or lost due to:
Fire or smoke
Theft, vandalism, riots
Freezing of plumbing, air conditioning, heating
Weight of snow, ice, sleet
Short-circuit damage caused by electrical appliances
Leakage or overflow of water or steam
Like we mentioned, not only does renters insurance cover your tenant’s personal property, it also covers their personal liability and medical expenses for which they’re liable. For example, say your tenant damages the apartment that they are renting from you — the walls, roof, floors, or stairs — and they are found liable for the damages, their renters insurance liability coverage can pay for the repairs. If your tenant is found liable for injury that happened to another person while on your property, your tenant’s liability insurance can pay for that person’s medical expenses or legal fees if they decide to sue your tenant.
Renters insurance can also relieve you of the responsibility of paying for your tenant to live elsewhere if your dwelling they are renting needs to be repaired. The loss-of-use coverage component of renters insurance can pay for your tenant to temporarily live in a hotel or a nearby rental while you repair your property following damage from a covered peril.
Renters insurance benefits the landlord, but it helps renters even more. It’s also affordable, costing an average of $15, so by adding it as a requirement to your lease you won’t be increasing your tenant’s monthly expenses by too much.
Additional interested party
If you’re worried about your tenant keeping their renters insurance policy in-force for the whole term of their lease, you request or require your tenant to add you to their renters insurance policy as an additional interested party. Also known as an additional interest or party of interest, this ensures you will be notified if there are any changes made to your tenant’s policy.
If you are an additional interested party on your tenant’s renters insurance policy, you can’t make payments or change the specifics of the policy. By being an additional interested party, you are simply notified or contacted if a payment is missed, if the policy is canceled, or if the terms of the policy are changed. Many landlords require this so they know their tenant’s insurance policy is still active.
What is landlord insurance?
Although renters insurance can minimize a landlord’s risk, it doesn’t actually offer financial protection for landlords. Some landlords already have homeowners insurance for their property, but if you’re going to rent out your apartment or house, you should purchase landlord insurance in addition to homeowners insurance. Just like renters insurance is financial protection for your tenant, landlord insurance covers your building and your property. Like renters insurance, landlord insurance contains liability coverage, so if someone gets hurt on your property then your landlord insurance can help you pay any legal fees or medical expenses that you are liable for.
You’re also protected from income loss, to an extent. If you’re unable to rent out a room or building when it’s being repaired from a specific covered loss, your landlord insurance can reimburse you for some of that income loss.