So should you require renter’s insurance? Absolutely.
Renter’s insurance not only protects the tenant’s property, but it also protects the owner’s property. This is big.
If a tenant causes damage to the property such as a fire, the tenant’s renter’s insurance policy should pay for the fire damage up to a certain amount. This is really important with property insurance being so expensive.
A renter’s insurance policy has huge benefits for the owner and the tenant.
The owner can have their property repaired without making a claim on their policy and the tenant benefits because if they started the fire for example, they would be financially responsible for the repairs and who has tens of thousands of dollars to pay for fire restorations, certainly not tenants.
That said, it’s important that you mandate renter’s insurance that protects the property.
Typically, how renter’s insurance works is the tenant gets their own renter’s insurance policy and names the owner as additionally insured on the policy.
But there’s a problem. Having a tenant carry a renters insurance policy is nearly impossible to mandate. Simply because they can cancel the policy.
Since it’s the tenant’s policy, they can cancel it at any time. And now you’re without coverage. What can the owner do when this happens? Not much really. Are you going to evict or cancel the lease because they canceled the renter’s insurance? This would cause an expensive vacancy. Who wants that?
There is a solution to this however, and this is what we’ve done.
Rather than have the tenant get their own renters insurance policy and name the owner as additionally insured, we got our own policy and named the owner and tenant as additionally insured.
Le’s look at what this accomplished.
With the renter’s policy in our name, the tenant cannot cancel the policy, so the property is always protected. We simply charge the resident the cost of the policy with the rent to get reimbursed.
This has worked out really well for us.
To sum up, should you mandate your tenants to have a renter’s insurance policy? Yes, but do it the right way.
I hope this helped. My name is Michael Bielon and I’m always here to help you with your property. Thank you for watching.
