Renting out your home to a stranger is a potential risk, and insurance can help to lower it. But with only around 40% of renters taking out renters insurance, you might be forgiven for thinking it isn’t a necessity.
But what happens when something goes wrong? Are you, as the landlord, going to be left footing the bill?
We reckon the benefits of renters insurance are clear. Here are 8 reasons why you should insist your tenants take out coverage.
1. Covers the Cost of Damages or Losses
Renters insurance is beneficial for both the tenant and the landlord, and one of the reasons why is because of the coverage it offers for damages or losses.
Landlord insurance will only cover damages or losses to the actual property, such as the building itself, or any equipment that belongs to the landlord. This could be the AC unit, washing machine, or the cooker.
For full coverage of everything in the property, and to cover any losses or damage caused by incidents like theft, tenants need to take out renters insurance.
Want to help your tenants out? Here are 5 tips to help them find the best renters insurance.
2. Reduces Landlord Liability in Case of Injury
Unfortunately, lawsuits are pretty common in the United States, and you might be surprised at the potential liabilities you face if people are injured on your property, even in the care of tenants.
If your tenant, a guest of theirs, or a neighbor is injured or affected by your property in some way, the tenant should be liable, but it doesn’t always work out that way.
The cost of such a lawsuit could be extremely expensive to fight. If your tenant doesn’t have the funds, you could be next in line for litigation if it can be proved that you were negligent in some way.
Your landlord insurance could cover this, depending on your policy, if it was your fault, or you didn’t do your due diligence to prevent it from happening. Your coverage won’t cover your tenants, however.
3. Clear Tenant and Landlord Responsibilities
By making renters insurance a requirement on your lease agreement, you can help set clear responsibilities for both tenant and landlord to follow.
For landlords, the property and anything in the property that belongs to you is your responsibility. You provide a safe and satisfactory home for your tenants to live in, and your own insurance will cover damages relating to that.
For tenants, renters insurance covers everything else. We’ve already mentioned about covering losses to a tenants possessions, as well as liability coverage for tenants. It will also cover medical bills for injury to others, as well as provide coverage for alternative accommodation if your tenant needs to move out.
When it comes to deciding on who pays for what in the event of a problem, having renters insurance will help make the responsibilities of your tenant clear.
4. Relationship with Neighbours
If you’re renting a property out, it can be beneficial to keep a good relationship with your neighbors. They can watch out for any adverse behavior when you’re not around, but it’s also important to ensure they’re not affected in any way by your property.
What happens if your tenants damage your neighbor’s property, or your neighbor is injured on yours? If your tenants are liable, lack insurance and can’t (or won’t) pay, your relationship with your neighbors is sure to suffer.
Once again, renters insurance can come to the rescue here. It’s cheap for your tenants, and it’s another way to keep surrounding third parties like your neighbors on your side when your property is rented out.
5. Peace of Mind for Both Tenant and Landlord
The coverage that insurance provides can give peace of mind for both you and your tenants.
Why leave things to chance?
Property damages, faultless or not, can be resolved thanks to insurance claims. Your tenants won’t lose out in the long run, given the overall cost of possessions and property, and neither will you.
Nobody wants to deal with the cost or difficulty of resolving problems like these when they happen, so by having your tenants take out rental insurance, you can take the pressure away from both parties in the long run.
6. It Can Help Protect Your Property Further
Obviously, as a landlord, you want your tenants to be safe in your property, but you also want your property to be safe in the hands of your tenants. Insisting on insurance for your tenants can protect your property alongside your own insurance.
What happens when an aircraft crashes into your house? Don’t laugh! While statistically, it’s not likely to happen tomorrow, if it did, who might foot the bill?
But more realistically fire, water, vandalism or other criminal damage are realistic possibilities, and sadly all too common occurrences. Where your coverage might have gaps, your tenant’s insurance will help to cover it.
Double the insurance? Double the protection, and no trouble for either tenant or landlord. Who wouldn’t want to make their property even safer?
7. Screens Poor or Unreliable Tenants
We don’t want to paint tenants in a poor light, as most will live without trouble in a property, but what happens when you end up with a tenant you can’t trust?
With average costs of only $12 a month, renters insurance is actually very affordable for tenants. If you insist on tenants taking out insurance, it isn’t going to be much of an additional cost for them.
However, if they do have financial problems, or if they’re just not likely to pay the rent on time, insisting on an insurance policy might cause them to reconsider taking out your tenancy.
While you should naturally do your due diligence when you consider a tenant, if your tenants react poorly to the idea of taking our insurance, it can act as a useful red flag to help you weed out unreliable options.
8. Reduce the Chance of Disputes
A relationship between a tenant and a landlord can prove to be stressful, and even difficult. With insurance in place, disputes between landlord and tenant can be reduced.
Who will pay for damages, or problems that crop up? Nobody wants to spend a huge amount of money to solve issues, but with insurance in place on both sides, that problem can easily be reduced. If your tenant needs to pay, they won’t be necessarily out of pocket thanks to their coverage.
Don’t let your relationship with your tenants get off to a bad start. Take heed of these 10 important tips for good tenant-landlord relations.
Take Advantage of the Benefits of Renters Insurance
We’re hoping you can see the benefits of renters insurance. When it comes to your property, you shouldn’t take any chances.
And with a clause like that in your contracts, you can build a constructive relationship with your tenants. Insurance closes any gaps in coverage between your buildings insurance and their own, providing both sides with peace of mind.
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