Landlords purchase insurance to protect their property and cover their liability. Tenants should do the same. A renter’s insurance policy can protect a tenant’s possessions and offers liability coverage in the event of an accident or other disaster. Here are six reasons every tenant should have renter’s insurance.
What Is Renter's Insurance?
Renter's insurance is a policy available to people who rent out property. Since the tenant does not own the actual property they are renting, this insurance protects the contents of the tenant's apartment and offers liability coverage if issues arise. Every renter’s insurance policy is different, so it is important for the tenant to understand their specific policy, including the amount of coverage, as well as what acts and events are covered.
6 Reasons Every Tenant Should Have Renter's Insurance
Tenants Are Not Covered By Landlord's Insurance:
- Some tenants mistakenly think they are covered by the insurance policy for the building. The landlord's insurance only protects the physical structure and any of the landlord's possessions. If the tenant does not have insurance and there is a fire at the property, the insurance for the building will not cover the tenant’s possessions.
Landlord's Insurance Does Not Cover Tenants
- Many tenants do not purchase renter's insurance because of the cost. It can actually be very affordable. Most renter’s insurance policies run between $100 and $200 a year. The cost will vary depending on factors such as the amount of coverage and the location of the property.
- A renter's insurance policy usually includes liability protection. For example, if a guest comes over and slips and falls on the property, most renter’s insurance policies offer liability protection that would cover the tenant for this incident. The amount of protection will depend on the terms of the individual policy.
- A renter’s insurance policy can offer protection if a tenant's possessions are lost or damaged by a fire or from wind damage, such as a tree falling on the property. Depending on the policy the tenant chooses, they can either receive an actual cash value for their possessions or the replacement cost. Replacement cost policies are usually slightly more expensive.
- By choosing a renter’s policy, the tenant can also be covered if there is a theft or burglary at their property. Again, the amount and type of coverage will depend on their individual policy.
Additional Protection for Landlord:
- A renter's insurance policy is an additional protection for the landlord. If there is an accident in the tenant's unit or their negligence causes damage to the property, the renter’s insurance policy will be targeted first. This can prevent the landlord from having to file a claim with their insurance company.
4 Reasons Tenants Don’t Purchase Renter’s Insurance
- They Don't Know About It- Many tenants don’t purchase renter’s insurance because they do not know it exists. They may have health insurance and car insurance, but they think insurance relating to the home is only for homeowners, not renters.
- Cost- Some renters do not purchase insurance because of the cost. They believe it is too expensive and would rather risk living in the property without it.
- Not a Top Priority- Some tenants know about renter's insurance, but put off purchasing it to focus on things they consider more important.
- Do Not See The Value- A tenant may think renter's insurance is a waste of money.. They would rather take the risk of something bad happening without being properly insured than paying the money so that they are covered.
What Is Not Covered By Renter's Insurance?
A renter’s insurance policy does not cover everything. The tenant will want to purchase separate insurance for expensive items, such as an engagement ring because the full value will never be covered by a renter’s insurance policy. In addition, the renter’s insurance likely does not cover damage from flooding. If flooding is a concern, a separate flood insurance policy must be purchased.
Making Tenants Aware of Renter's Insurance
Landlords should tell their tenants about renters insurance. You should include a renter’s insurance addendum in your lease agreement that makes it clear that the tenant and the tenant's property are not covered under your insurance policy.
Some states allow you to require tenants to purchase renter’s insurance as long as this requirement is in place for all tenants. Check your local landlord-tenant laws to determine the rules in your area.