Given the high potential for disputes about rent and repairs, landlords and tenants often find themselves at odds during their relationships. Both sides should agree about one thing: renters insurance.
Renters insurance protects both the interests of the tenant (by protecting their belongings from covered perils) and the landlord (by keeping tenants safe, satisfied and paying rent for the full term of the lease).
However, only about 35% of renters purchase insurance; that compares poorly with the percentage of homeowners who purchase coverage — around 96 percent, according to the Insurance Information Institute.
A big reason for the disparity: Virtually all lenders require mortgage holders to buy and maintain homeowners insurance. But that doesn’t explain why more renters don’t protect their valuables. Likely reasons include mistaken assumptions about tenant/landlord responsibilities.
- Property owner: Your policies don’t cover everything. Landlord insurance protects only the structure of your rental property from named perils such as wind and fire. If your tenants lose possessions in a natural disaster and can’t afford to pay rent, you’re out income. Encouraging — or even requiring — your tenants to buy insurance can help make sure that doesn’t happen.
- Renter: Your landlord is not responsible for your possessions; you are.
Here are three scenarios in which renters insurance can benefit both renters and landlords:
Scenario No. 1: Theft
Renter: If thieves break into your apartment and steal your valuables, your renters insurance policy will pay for the items’ replacement or repair. If you don’t purchase renters insurance, you’ll have to replace the items on your own dime.
Landlord: If burglars rob one of your rental properties, your tenants’ insurance policies can be helpful in a couple of ways. Renters who don’t have coverage might not be able to replace everything stolen — particularly gaming systems, computers and televisions — and still pay rent. They could break their leases, leaving you with vacant properties. If you didn’t deliver the security measures specified in the lease, they could even blame you for the break-in and cause disruption to your business and rental income.
Scenario No. 2: Storm and fire damage
Renter: If your apartment or rental home becomes damaged in a fire or other named peril, your renters policy can help to repair or replace your possessions. Standard policies also typically come with loss of use coverage, which can help pay your expenses if you have to relocate for repairs.
Landlord: Your landlord insurance policy will pay for lost income while your rental property undergoes repair. During the repairs, the tenants must make other arrangements. Those with insurance can be reimbursed for expenses, which means they’re much more likely to make temporary arrangements and move back in once the property is habitable again.
Scenario No. 3: Liability
Renter: The injured person decides to sue. If you have renters insurance, the personal liability portion of your policy can help you with legal expenses, including any damages awarded in the case. Without renters insurance, you could find yourself in the middle of a pricey legal battle.
Landlord: Most insurance carriers and some landlords put restrictions on the kinds of dogs allowed on the premises, but even dogs of docile breeds can lash out. If they do, one tenant could become embroiled in a legal battle with another. You could even become involved in the dispute. Even if you aren’t, your professional reputation and profit could suffer.
Considering that the cost of renters insurance is $15 to $30 per month, according to the National Association of Insurance Commissioners, the pros of purchasing protection typically outweighs the cons. Renters also could qualify for discounts for common apartment features such as smoke detectors and deadbolt locks. Those with good credit also could qualify for price breaks on premiums.
- Landlords: Make inquiring about or suggesting insurance part of your screening process.
- Renters: Consider purchasing insurance even if your landlord doesn’t require it. If everyone has protection, everyone wins.