When you own or manage a property for rent you may be blamed for everything. A common misperception with tenants is that your dwelling (homeowners) insurance will also cover them. Tenants must understand that they need their own renters insurance to protect their personal belongings.
“Your House Ruined My Stuff”
A tenant in a property we manage apparently took a very long, leisurely, shower. Somehow a leak developed from the PVC drain line of a rather substantial size. Nobody knew that the drain was slowly filling the tenants overstuffed couch one floor below with a lot of soapy, dirty (this does not reflect on the tenant-all shower water hitting the drain is dirty!), shower water.
After she completed her shower she went downstairs. There she found sagging drywall and her wet couch. The couch was soggy beyond just using a blow dryer and drying it out. She called us (her landlord) and we got our plumber there immediately. The next day, the tenant called to ask if the owner would be filing a claim on their insurance? If so, would he please include her couch?
The owner’s insurance will fix the shower drain and the ceiling, and even the flooring below. It is not going to include a tenant’s personal property. In this case the owner has a $1500 deductible and does not even plan to file a claim. The tenant was referred to her lease which states:
Owner and Tenant shall each be responsible to maintain appropriate insurance for their respective interests in the Premises and property located on the Premises. Tenant understands that Owner will not provide any insurance coverage for Tenant’s property. Owner will not be responsible for any loss of Tenant’s property, whether by theft, fire, riots, strikes, acts of God, or otherwise. Tenant is responsible for liability/fire insurance coverage on premises. Tenant agrees to obtain and maintain a mandatory Renter’s Insurance policy.
We have a move-in checklist that includes the renters insurance proof. The tenant had forgotten entirely that she had purchased this coverage. We were able to point her in a different direction upon reviewing her file and telling her that she had her own coverage for this event.
Renters Insurance Protections
The reasons are varied that a rental owner wants their tenants to have this insurance. Here are some of the protections it offers both the owner, manager, and tenants.
This coverage is the single most important component of renters insurance. It will help the tenant replace their “stuff” if it is unexpectedly damaged or ruined. If the tenants property is damaged from water or smoke, the insurance will cover it. If their property is stolen, it will be covered. Deductibles for this coverage are low (much lower than those in homeowners insurance). This also means the tenants can’t make the excuse that they can’t pay the rent because they had to replace their bed.
There are different coverage limits and a tenant should make sure they have the appropriate amount of coverage.
Your tenant decides to start a fight with the neighbor over a barking dog. His renters insurance will keep the owner out of the lawsuits that follow. Or, how about the innocent baseball that breaks a neighbors window? This coverage will provide the tenant with personal liability coverage to include any damages the renter may cause to your property via negligence or human error. This is protection that the tenant will be the party that provides the monetary damages.
Additional Living Expenses
The tenant has coverage if your rental becomes “not habitable” due to an event such as broken pipes or fire. This may minimize the requests to the landlord for compensation to pay for another place to live.
Discounts on Auto Insurance
An extra bonus! Your tenants likely drive a car and hopefully have it insured. If they add a renters insurance policy they may actually save on their auto insurance, making the net cost of both coverages negligible.
Cost to the Tenant
Do not worry if you are concerned about burdening tenants with the cost of renters insurance. Renters insurance is one of the most affordable types of insurance available. For example, $15,000 of contents insurance with $100,000 in liability coverage may cost $10-$20 a month.
Be sure and request that either the owner or manager is named as a certificate holder for the insurance. This gives the named party the right to be notified if the policy should lapse or be cancelled.
For the rental owner, it is important your property is insured and protected from most risks. In addition to your non-owner occupied homeowners coverage, ensure your tenant has their renters insurance to cover their own risk of losses. Then all parties should be able to live normally knowing their assets are protected from most perils.