Most people who own a home carry homeowners insurance. It’s a small price to pay for peace of mind. It protects all of your belongings and your property should something happen.
The same though isn’t necessarily true for many renters. Whilst landlords are required to have landlord’s insurance, this only covers the building itself, landlord insurance will not cover the contents of the apartment, nor someone suing for damages if they had an accident within your apartment or rented space.
Renters insurance is a form or property insurance that covers a tenants personal property as well as covering liability claims. Renters insurance is one of the cheapest and easiest to obtain insurance policies that a person can get. Yet, surprisingly, many tenants don’t have it.
No matter how careful you may be with your own apartment (the sort of residence most renters have), you can’t control your neighbors. They can leave your security gates open, buzz ill-intentioned strangers into your building, or fall asleep with a cigarette in hand and start a serious fire.
Why, if it’s so important, cheap and easy to obtain, wouldn’t tenants object to obtaining this peace of mind to protect themselves and their belongings from misfortune?
What Renter’s Insurance Covers
A very basic renter’s insurance policy will cover the contents of the dwelling as well as some basic threats. These basic named threats generally include perils like; fire, theft, vandalism, plumbing, and electrical malfunctions and certain weather-related damages.
Another common policy component covers loss of use. Meaning if the property becomes uninhabitable the policy will provide some money to pay for temporary housing, (this has to be specified on the policy; if it isn’t; it isn’t covered).
A final clause of the renters insurance that’s well worth making sure the policy has is cover for their car and luggage whilst travelling. It will also pays any court judgments as well as legal expenses, up to the policy limit.
- Renter’s insurance is much like homeowners insurance but without any need for covering the property itself which makes it much cheaper for the tenant.
- Basic policies will cover loss for damage of items in the home related to fire, theft, vandalism, plumbing, and electrical malfunctions.
- The renter may need a separate policy for more expensive items like specific items of high value jewellery or art.
- Renters should take and maintain and inventory check of the belongings if they do need to make a claim.
- The two different types of renters insurance are cash value and replacement.
- Actual value pays what belongings are worth at the time damage.
- Replacement value pays the cost of replacing the items.
What Doesn’t Renter’s Insurance Cover?
Renters should be equally aware of the things that the policy doesn’t cover, as much as what the policy does cover.
For example most policies don’t actually cover the following (though you can normally get this coverage for an additional cost):
- Backup of sewage into the residence.
- Other natural disasters deemed “Acts of God”.
- Unusually expensive items i.e. Musical instruments, an expensive art collection, fine jewels.
Renter’s insurance policies also do not cover losses caused by the tenant’s own negligence or intentional acts.
Why is Renters Insurance Important for the Landlord?
Tenants having their own insurance acts like an additional layer of protection for everyone, not just the tenant. Things do go wrong, and should disaster strike your renters, even a basic policy will help repair damages and ease the process of making things right again.
For the landlord it will also actually reduce the amount you or your insurance have to pay which will help keep premiums down and helps avoid costly legal fees.
If any major damages do occur you will be able to avoid disputes with your tenants over who has to cover what costs, and it means should the property become uninhabitable your renters won’t be out on the streets.
Final benefits are that your tenants are less likely to sue you to try and claim compensation for loss. Which whilst they may not win (though they just might) – it would be a timely and expensive process anyway.
Renters insurance could save everyone a lot of time and heartache.
The Bottom Line
Should you require your tenants to get renters insurance? The policies aren’t expensive and they will offer the tenant and yourself peace of mind. It’s well worth them having it for their own belongings.
It’s a good idea then to have a clause in your lease requiring tenants to purchase their own renters insurance when they move in. If they don’t then they will be in breach of contract and should something goes wrong, you will have reduced your own liability.
Remember your landlord’s insurance protects the building; it never covers a tenants belongings.