Landlords can require renters insurance as part of the lease agreement. Both tenants and landlords benefit from this arrangement.

In fact, some tenants believe their landlord is responsible for all their possessions. That's not true.

Renters insurance protects tenants from expenses after damage or loss of their property. Whatever personal belongings they have inside the rental unit is covered by an appropriate insurance.

Renters insurance provides similar value to homeowners insurance. Broken furniture, water-soaked tablet, or a stolen bicycle, renters insurance covers these. Yet, in most cases, these items would definitely not be covered by landlords insurance.

In the following paragraphs, you'll learn why landlords should require renters insurance in the lease:

 

1. Minimize the risk of lawsuits

Your tenant's belongings get damaged and they have no renters insurance. The landlords' liability policy won't cover the expenses. In many cases, tenants try to claim that some of the responsibility belongs to the landlord.

Renters insurance is a great antidote for unexpected lawsuits. The insurance protects your tenants' personal property against damage or loss. If someone is injured on the property, the insurance will likely cover their personal liability too.

 

2. Screen the tenants

Screening your tenants is important, and you watching out for the red flags is vital. Not being able to afford the renters insurance should raise some concern. If your tenants aren't able to pay affordable rates for renters insurance, will they have the financial stability to pay the rent on time? Tenants that struggle to live from paycheck to paycheck can threaten your rental income.

That is why demanding renters insurance is so strongly recommended. It helps to screen your tenants for any problematic financial behavior.

 

3. Provide a pet-friendly space

When you accept pets, your pool of potential renters widens significantly. Renters insurance may help you deal with the risk of property damage or dog bite liability.

The actual details of the coverage depend on the particular animal, state, and insurance provider. That is why you should check your tenant's policy before allowing pets only on the basis of renters insurance. Otherwise, you could discover that the insurance is more restrictive in terms of covering claims connected to pets.

 

4. Cover your deductible

Let's say that your tenant accidentally floods the apartment. Landlord insurance might cover all the repair costs, but the deductible is something you still have to worry about.

Good renters insurances cover the landlord's insurance deductible. This way, you can relax and don't have to stress about unexpected situations.

 

5. Decrease your responsibility

Inconveniences can and do occur. Fires, floods, or other natural disasters may cause the rental unit to become inhabitable. In some states, you are held responsible for covering relocation costs.

You need to deal with rebuilding and repairing the damage, which is where renters insurance offers yet another benefit. Many policies pay their temporary living costs.

 

Important: check the policy for renewal!

Did your tenant have a renters insurance when they signed the lease? If so, it doesn't necessarily mean that they hadn't forgotten to renew the insurance. To be cautious, check the insurance for its renewal on an annual basis.

Should you discover that they canceled it on purpose, you have the right to terminate the contract. The only condition is that holding a valid renters insurance policy is clearly stated as a prerequisite for the lease.

 

Why should landlords require renters insurance?

Renters insurance isn't only beneficial for tenants. It's something that proves to be useful for landlords as well.

Requiring renters insurance in the lease can decrease your responsibilities, cover any deductible, and cuts the risk of getting any lawsuits.

The benefits aren't only about lowering risks and responsibilities. Additionally, you could weed out the prospective tenants that aren't able to afford the insurance. It's definitely a red flag to watch out for.

If you want to maximize your pool of renters, allowing pets is a great idea. Some renters insurances cover dog bite liability and insurance claims specific to housing pets.

Renters insurance is something your tenants should get excited about, too. Landlord insurance typically doesn't cover damage or loss to tenants' personal belongings.