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Landlords: Yes – You Can Make Your Tenant’s Obtain Renter’s Insurance

We are often asked if a Landlord can make a tenant purchase Renter’s Insurance, and the short answer is:  Yes, you can.

We are a California-based insurance agency and not attorneys, but we have seen articles by attorneys confirming this (most recently the October 2014 issue of the AOA – Apartment Owner’s Association - magazine). 

On a practical level, we provide Evidence of Renter’s insurance forms to residential landlords all of the time.  And, given California is so protective of tenant’s rights, I suspect that if California Landlords can do this so can Landlords in other states (still, not a bad question to ask your local association or an attorney specializing in protecting Landlords).

Generally speaking, you can do it in the three following ways:  You can . . .

  1. Require this as a part of the lease of premises, where you request that the evidence of renter’s property and liability insurance is to be provided prior to the move-in date and annually thereafter.
  2. Amend your existing residential leases with a Change in Terms of Tenancy.  While that is a specific California form, again I suspect other states will allow this.  The problem with this, though, might be that the tenant will view it as a de facto increase in rent and move on to the next apartment or rental dwelling.    
  3. Encourage your tenant to obtain this insurance by offering them a slight cut in rent ($10 a month, for example).

And, why would you care – why is it good for you, the Landlord, to have your renters obtain Renter’s Insurance?  It is mainly selfish, and there is nothing wrong with that as what is good for you is also good for the tenant.  Here are some very good examples of how Renter’s Insurance helps both of you:

  • When there is a severe water pipe break or a fire in the units, the tenants will have to move out.  They will also have to pay more money to live somewhere temporarily, even if your rent is suspended and they get a credit while they are out.  Your insurance company will not pay your tenant’s rent to someone else, in another facility while they are out of your units.
  • Your insurance will not pay for the damages to a renter’s personal property, such as damaged furniture, appliances, clothing, toys, etc., but a Renter’s Insurance policy will pay for the cost of the damages to the renter’s personal belongings.  This will enable the renters to save by not having to buy all new clothes, furniture and appliances – not to mention the toys – from their own funds.  And, that makes them viable tenants if they come back to your property.   
  • Having a source to provide your Renters with funds following such an event is huge; the chances are that they do not have the extra cash or credit to incur such a cost. With the Renter’s Insurance, they will be able to recoup their losses; it may be the only way they can.  And, if they have the means to stay for a month or so in a Residence Inn while their home (your investment property) is being fixed, they will likely come back.  You Win!
  • What if they have a dinner party and start a kitchen fire?  Kitchen fires are very costly to everyone:  the tenant, your insurance company, and you.  And, you bear a lot of the eventual fallout.  You will suffer a deductible, and your insurance premium will be increased or the policy not renewed – and that will result in an even larger increase in your insurance premium when you have to go to the “secondary market”, where you pay more premium and get less protection.  If the renter has Renter’s Insurance, the liability portion of the policy will be available for your insurance company to recoup its losses and your deductible.  And, you have a better chance to continue your preferred insurance program.  You Win again!

I can go on – but I won’t.  I’m certain that you can think of other reasons for your tenants to have their own insurance.  So, go ahead and make it a part of your lease – and reap the benefits!      

 Insuring Your Success!

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