While it is apparent how renters will benefit from renters insurance, it can be less obvious why it is beneficial to the landlord. The reality is landlords will also be provided with added security when their tenants purchase renters insurance. In fact, the benefits are so great many landlords are now requiring renters insurance (note: requiring renters insurance is not legal in every location, check with local laws and regulations before implementing a requirement).
How will you benefit from your tenants purchasing renters insurance? Read on to find out the top benefits of renters insurance for landlords:
Covering The Gap
As a landlord, you carry your own insurance to cover your rental properties. This insurance is there to protect your investment in case disaster strikes. However, you likely have a fairly high insurance deductible. This gap in your coverage is where renters insurance can come into play. Consider the following story as an example of how you can benefit from renters insurance as a landlord.
The Great Turkey Fry
Let’s imagine a tenant decides to throw a beautiful and lively Thanksgiving party. They are excited about serving their guests only the most delectable turkey dinner. Without your knowledge, they head up to the nearest store and purchase a brand new turkey fryer.
The day of the party rolls around and while the party goers flow in, the booze starts flowing as well. Your tenant sets up the turkey fryer over their fifth glass of wine and pays little attention to the directions.
One glass of wine leads to another and before your tenant knows what’s happening, the turkey frying has led to a massive oil fire that is raging out of control. The partiers flee the scene, the fire department is called but, alas, your rental property has been burned to the ground.
You have insurance for the property but you also have a $5,000 deductible. The story can go one of two ways, depending on your renter’s insurance.
- Your renter was responsible and purchased renters insurance. Their insurance covers the $5,000 deductible you owe, and you are no longer out the money.
- Your renter never purchased insurance and is broke. They can offer you no money for the deductible and they flee the country, leaving you with a burned down house.
While this story is assuredly on the extreme sounding side, the reality is that disaster can strike your rental at any time. Most renters are not equipped to handle the costs of something as large as a fire, leaving you to bear the brunt of the costs. According to Harvard’s Joint Center for Housing Studies, renters have median cash savings of $630.
The takeaway is when your renter has insurance, they are more likely to be able to contribute to major disasters that take place on the property. Average renters do not have the funds without insurance to handle catastrophes.
Correlated to the fact that renters insurance will help in the case of disaster striking your property, it will lead to a smoother relationship between you and your tenants. A tenant without insurance is more likely to try to place the blame of any repair or replacement at your feet. A tenant who has renters insurance to cover these costs will be far more willing to take responsibility for items.
The bottom line is that renters insurance helps mitigate risks for every party involved. The good news is that renters insurance is reasonably priced, with plans that start as low as $15/month. This means your tenants can choose a plan that fits their needs without causing undue financial hardship.
Requiring Renters Insurance
While it is not legal in all places to require renters insurance, in the locations it is legal, it can be a wise decision. Insurance will help keep your home protected from tenant related accidents and it will also benefit your tenants greatly. They will be protected from theft, destruction, and loss of property, leaving both you and your tenants with greater peace of mind.
DISCLAIMER: TurboTenant, Inc. does not provide legal advice. This material has been prepared for informational purposes only. All users are advised to check all applicable local, state and federal laws and consult legal counsel should questions arise.