Purpose: To inform about renter's insurance policies and how they affect property management.
- The purpose of renter's insurance.
- Misconceptions about insurance.
- How property managers and building owner's benefit from a renter's insurance policy.
Property managers have many responsibilities, and reducing costs is just one of them. That’s why it’s a good idea to require tenants to have renters insurance.
You may need to explain the benefits of renters insurance in order to convince tenants this is a reasonable request. According to recent statistics, only 37% of tenants in the United States carry this kind of insurance.
That’s often because they’ve fallen prey to misconceptions. Many tenants don’t realize renters insurance is much less expensive than homeowners insurance. Additionally, they often don’t understand that the landlord’s property insurance does not extend to their personal property or many loss-of-use scenarios.
Requiring tenants to carry renters insurance plans doesn’t just benefit them. As a property manager, you also benefit when renters protect themselves financially. The following are key reasons why.
Again, a renter may not know that your property insurance doesn’t protect them in certain situations. Thus, they may try to hold you financially responsible if their property is damaged or the space becomes temporarily uninhabitable.
This can be costly. Granted, if the lease language is clear, you’ll probably win any case a tenant brings against you. However, that doesn’t change the fact that you’ll still have to devote significant amounts of time, money, and resources to fighting the case if a tenant does file a lawsuit. If they get compensation from an insurance provider after their property is damaged, they’re less likely to sue.
There are many reasons that a property may become suddenly uninhabitable, such as flooding or a fire. In some states and cities, landlords are required to provide tenants with financial assistance in cases where they’re forced to find a new place to live. This can be very costly to a landlord if a major incident occurs at the property.
Tenants who have renters insurance may be protected in these situations. Their insurance provider will handle their relocation costs so you can focus on making the space livable.
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Including a stipulation in the lease that requires tenants to hold renters insurance could help you evaluate applicants. Again, these types of insurance plans are generally very affordable. A potential tenant who tries to negotiate their way out of the renters insurance stipulation may not be financially secure enough to afford their rent in the future. You can use their reaction to assess whether or not they’re someone you can trust.
Don’t make the mistake of assuming renters insurance only benefits the tenant. When your tenants are financially protected, everyone reaps the rewards.
Guest Post by Rae Steinbach
Rae is a graduate of Tufts University with a combined International Relations and Chinese degree. After spending time living and working abroad in China, she returned to NYC to pursue her career and continue curating quality content. Rae is passionate about travel, food, and writing, of course.
Follow her on Twitter at @araesininthesun