Requiring your tenants to have renters insurance coverage is one of the best ways to protect yourself, your rental property, and your tenants. Unfortunately, many tenants feel that renter’s insurance is not necessary. Only around 55% of renter-occupied homes have renters insurance, compared to 88% of homeowners who have a homeowners insurance policy. Today, we’re reviewing the importance of insurance and how to help renters calculate their coverage.
Contents of This Article:
- Why Do Some Renters Go Without Insurance?
- Renters Insurance: A Quick Overview
- 3 Ways to Help Your Tenants Calculate Renters Insurance
- How Can Professional Management Help?
Why Do Some Renters Go Without Insurance?
Many tenants say their belongings are not worth enough for renters insurance. They also feel that the landlord should already insure the property and that renters insurance is an additional expense that is too costly.
However, tenants vastly underestimate the value of their belongings and, thus, the value of having renters insurance. It’s important to know that homeowner’s insurance does not cover the cost of tenants’ belongings or tenant displacement. And, despite what some people say, a renters insurance policy is relatively inexpensive.
That’s why requiring your tenants to have a renters insurance policy in place before they move into your rental property is crucial to your success as a rental property owner or Washington DC property manager.
It just so happens that there are ways you can help your tenants determine how much renters insurance coverage they need so that, should the unthinkable happen (think fire, flood, theft, or injury), they are adequately covered.
Renters Insurance: A Quick Review
Renters insurance is a policy that protects tenants and their personal belongings in an emergency. It also covers personal liability issues should 
anyone be injured or damage something while on your property. A good renter’s insurance policy will cover additional living expenses should your tenant become displaced due to an emergency or uninhabitable living situation.
According to Liberty Mutual, here are some of the key things renters insurance will cover:
- Personal property such as furniture, clothing, and electronics
- Valuable items up to a specified amount
- Any personal belongings stolen from your car
- Medical bills related to any injuries that occur on the property
- Legal costs should anyone sue your tenant
- Accidental damage done to your property
- Reimbursement for housing and living costs in the case the property becomes unlivable
It is important to remember that a renters insurance policy doesn’t cover everything. So, encourage your tenants to talk to an insurance professional before purchasing a policy to ensure they are adequately covered.
3 Ways to Help Your Tenants Calculate Renters Insurance
Helping your tenants determine how much renters insurance coverage to invest in is as simple as following these three tips.
- Calculate the Value of Their Possessions
- Recommend Liability Insurance
- Encourage Documentation
Calculate the Value of Their Possessions
The first thing you will want to help your tenants with is the overall value of their personal belongings. This will include every personal item they own, not just expensive items like furniture and electronics.
Suppose your tenant estimates they have $5,000 worth of personal items and lose everything to a fire, only to find out they really had upwards of $10,000 in personal belongings. In that case, your tenant is going to be in financial trouble.
That’s because any purchases that exceed the insurance payout amount will be the tenant’s responsibility. That said, several can help your tenants determine approximately how much all of their personal items are worth. From there, the key is to insure belongings for more than their cash or depreciated value so there will be enough coverage to replace everything.
Recommend Liability Insurance
Liability insurance is not always included in a standard renters insurance policy. As such, it’s helpful to either require liability coverage up to at least a certain amount or strongly encourage tenants to add that type of coverage to their policies.
In fact, if you are working with a professional property management company, chances are they will suggest that you require liability insurance and renters insurance before a tenant can move in.
Liability insurance typically covers bodily injury, medical bills, and property damage caused by tenants or guests in your rental property. This additional coverage is usually inexpensive and worth adding on.
The last thing you want is for your tenant to become financially responsible for an injury on your property. This kind of financial strain may cause them to be unable to pay the monthly rent and ultimately break the lease agreement early. As a result, it could leave you without a monthly rent collection and a vacant property that now has to be filled.
Encourage Documentation
Encouraging your tenants to document their personal belongings via receipts and photographs is important. This documentation proves that the amount of coverage owed in an insurance claim is legitimate.
Plus, documenting every personal belonging helps your tenants calculate the actual value of their belongings, ensuring the right amount of renters insurance is purchased. For instance, you cannot claim a million dollars in personal belongings and collect that amount after an emergency without proof the belongings existed. After all, insurance fraud is a big problem and is very carefully monitored.
You should also remind tenants that in the event of an emergency that results in significant property damage, the insurance company is going to demand to see proof of their belongings before paying out on the policy.
How Can Professional Management Help?
Helping your tenants understand the importance of renters insurance coverage should be one of your biggest priorities. This is not only because it is helpful to your tenants but also because it is helpful to you. Should an emergency, injury, or property damage occur, anything not covered by renters insurance may carry over to your homeowner’s insurance.
By requiring your tenants to have renters insurance, you protect your bottom line and save yourself from higher premiums should something terrible happen to your property or the people inside of it.
If you own rental property and want help structuring a lease agreement that requires renters insurance coverage, contact Bay Management Group now.
We have years of experience in the rental property industry and know that renters insurance is necessary when placing new tenants in your investment property. We can draft lease agreements that require renters insurance, help your tenants determine how much they should be insured for, and help you maintain your bottom line should anything happen to your rental.
Learn more about our rental management services throughout Baltimore, Philadelphia, Northern Virginia, and Washington, DC, today!
