Proper insurance is essential for both tenants and landlords. While landlord’s insurance protects the property owner, renters insurance covers the tenants and their personal belongings. The question is: Should landlords require renters insurance?
Why You Should Require Tenants to Have Renters Insurance
It Protects the Tenant's Personal Property
Renters insurance is designed to protect tenants most of all. Part of the standard coverage is protection for their personal belongings when damaged by fire or natural disasters, negligence, or theft. If the damaged or stolen items are considered a covered loss, then the renter would be compensated for it.
It Offers Liability Coverage
If an accident happened within a tenant's rental unit causing a guest to be injured, renters insurance can protect them from potential liability claims. The insurance coverage can pay for medical expenses and or legal costs should the guest press charges for negligence or unsafe environments. The financial assistance will depend on the kind of insurance and insurance premiums, of course.
It Can Help with Relocation Expenses
Having their own renters insurance policy provides them with reimbursements should they need temporary housing and other additional living expenses like food and laundry, should their home be affected by a fire, a hurricane, or other natural disaster. It's called a "loss of use" coverage, and it's common in places like Houston, which is prone to natural disasters like flooding.
How Much Renters Insurance Cost
The cost for renters insurance varies between states and insurance companies. On average, insurance premiums can cost around $157 a year, as per Forbes. This provides $15,000 of personal property coverage. If a renter has a higher renters insurance cost, then the insurance coverage would also increase. With about $13 a month, some might choose to opt for a more expensive plan for better protection.
Factors That Affect Insurance Rates
Deductible
The renter's insurance policy can cover various amounts, depending on the plan you get. The lower the deductible amount they choose, the higher their rate will be, and that's because the insurance company or provider will pay more if they do claim reimbursement for the loss of personal property.
Disaster Exposure
Some states have higher rates for renters insurance because they are more prone to catastrophes resulting in damaged property. A tenant's insurance premium can increase whether or not you file a claim. Houston, for instance, has the highest rate in Texas with a $21 average monthly rate.
Property Condition
With an older rental property, renters insurance may also require higher rates from them due to increased damage and liability risk. As a property owner, you can maintain your rental or hire a property manager who can do it for you to reduce risks, but it would still be advisable to require renters insurance from your tenants for their protection.
Can a Landlord Require Renters Insurance?
The short answer is, yes. You can have renters insurance required as part of your lease agreement. There is no law requiring renters insurance from tenants in Houston, but many landlords still choose to recommend tenants purchase one to protect their personal belongings. The price will still depend on the renters' policy, but the additional cost will be worth it to have medical and liability coverage.
What if Tenants Refuse to Purchase Renters Insurance?
It's standard that landlords require renters insurance for the protection of their tenant's belongings, but some may not want to. If it's part of your renters' policy, you can either reject their application or come to another kind of insurance policy. You may also explain the benefits of renters insurance to them and how it may help them in case of emergencies or incidents.
Other Kinds of Insurance Landlords Should Consider
Landlord Insurance
Aside from renters insurance, a landlord should also look into landlord's insurance not only for personal liability but for the protection of their personal property. It partially covers costs in many cases such as:
- Property Damage: It covers loss or damage to real estate and furnishings in case of a natural disaster, fire, electric malfunction, earthquake, vandalism, or tenant-caused damage.
- Lost Rental Income: Unfortunately, requiring renters insurance doesn't cover losses like unpaid rent, but landlord's insurance does. It also covers rental default when the property becomes inhabitable from circumstances like an infestation, it will provide rental reimbursement to cover rent you could've earned.
- Liability Protection: While renters insurance coverage answers for accidents within a tenant's dwelling unit, landlord's insurance will cover medical or legal costs for injuries caused within the rental property in the event of accidents caused by icy walkways or unstable structures.
Homeowners Insurance
This kind of insurance protects your personal property more than anything else. It will be helpful when you apply for a mortgage since banks usually look for proof of insurance before they loan you funds. Other than that, the main benefits include:
- Dwelling Coverage: Requiring renters insurance only covers the tenant's property, but not yours. If the unit is damaged through outside factors like fire or wind, both homeowner's or landlord’s insurance can cover costs for repairs.
- Personal Property Coverage: It can also cover furnishings outside the dwelling units such as furniture, electronics, and other personal items you might have in your rental properties.
- Liability Coverage: Similar to landlord's insurance, this can cover costs associated with risk and injuries within the property, as well as property damage caused by you or members of your household. In the event of an accident, it can pay for medical bills or legal fees in potential disputes.
How Property Management Benefits You
Landlord, homeowners, and renters insurance can help all parties involved, but it only covers so much. There are a lot of aspects in the rental business that you need to oversee so that you won't have to make insurance claims in the first place.
Hiring property managers for rental properties is a choice many landlords have opted for. Companies like Precision Reality can handle property maintenance to avoid unwanted incidents, and rent collection to prevent income loss. We have a plethora of services that can help you maximize your property's value, and all you have to do is contact us to find out more. We offer free consultations!
