As a landlord, protecting your rental property likely comes as second nature, and having an insurance policy in place is an essential part of that. Landlord insurance provides a wealth of protections that homeowners insurance can’t begin to touch however, there’s another form of insurance you may be overlooking.
Renters insurance policies are a must-have for your Maryland rental properties. While they’re inexpensive to maintain, they provide you and your tenants with protections not offered by landlord insurance, saving you money – and expensive litigation – in the long run. But what is renter’s insurance? What does this policy cover? And how can it benefit you?
What Is Renters Insurance?
Renters insurance policies are inexpensive types of coverage designed to protect a tenant’s property within a rental home in the event it is lost, stolen, or damaged. In addition, some policies will cover alternative living arrangements if the rental property itself is deemed too damaged to live in after a more substantial loss from fire, flood, or another natural disaster. Finally, in the event someone is injured on the property, renter’s insurance can fill in the gaps and provide coverage for the injured person.
Most renter’s insurance policies include three primary types of coverage, which can vary by provider and can depend on the policy specifics:
- Contents Coverage. This is often the most important part of coverage for the tenant. Contents coverage allows the tenant to replace the insured items of the home in the event of a loss.
- Loss of Use Coverage. In the event of damages to the rental property, loss of use coverage protects both the tenant and landlord by covering the additional living expenses of the tenant until repairs can take place.
- Liability to Landlord Coverage. This coverage is the most important for the landlord or property owner and provides protection in the event someone damages the property.
What Does Renters Insurance Cover?
As with most other types of insurance, renter’s insurance coverage policies vary by state, county, and may differ depending on the company providing the service. In addition, pricing for renter’s insurance policies are different depending on the type of rental property, liabilities included, policy structure, reimbursement levels, and deductible. It is a good idea to compare a variety of policy types from different companies to determine which coverage offers the most protection for both you and the renter, and which is the best value.
Even the most basic type of renter’s insurance covers the tenant’s property in the event of a loss due to fire, theft, and other incidents. Generally, the policy will include replacement of items lost up to a reimbursement limit, minus the deductible paid by the policyholder. In addition to traditional coverage types, most renter’s insurance protects the contents of vehicles on the property as well as anywhere else the renter travels while insured.
However, it is essential to ensure that any renters insurance policy extends to include water damage. The most basic policies often do not cover damage from flooding or wind damage due to hurricanes, so your renters may need to purchase added coverage. In addition, many of the basic renter’s insurance policies only replace or reimburse property losses at a depreciated value and may have a much higher deductible.
Other types of coverage offered involve protection from liability for both the landlord and the renter. Renters liability insurance protects against liability in the event someone is injured on the property. This protection can prevent renters from attempting to assign responsibility to the landlord after an injury. Typically, such coverages include legal fees and court judgments up to $100,000 as well as medical payments up to as much as $5,000.
Landlord liability protection saves you from having to pay if the rental property is damaged due to negligence on the part of the renter. For example, if a tenant starts a house fire by leaving a hot pan on the stove, renter’s insurance protects you from liability. So, if your tenants caused thousands of dollars’ worth of damage to your rental property, landlord liability protection will protect you from incurring such costs.
Can You Require Tenants to Purchase Renters Insurance?
It is important that landlords take all the necessary precautions to prevent liability with all rental properties in Maryland. You can require tenants to purchase renter’s insurance as long as you require all your tenants to do the same. To ensure your tenants are aware of the requirement, include it in your rental listing as well as in the final lease agreement. Some tenants assume landlord insurance covers their belongings. But by adding language into the rental listing and lease agreement that stresses the fact that renter’s insurance is required to provide any protection for tenant belongings, you can ensure renters are aware of the contract.
Require proof of renter’s insurance after the lease is signed, as well as yearly upon lease renewal. However, be aware that some tenants may merely allow the policy to lapse, leaving both of you without protection. If you need extra reassurance to ensure that your property is covered at all times, request that the tenant name you as an “additional interested party” so the insurance company can notify you if any policy changes are made.
Renters insurance is relatively inexpensive – as little as $5 per month. The average cost typically sits somewhere between $15 and $20, though those amounts can vary greatly due to location, recent hurricane, hail, or other activity, and if any additional coverage is needed. Even with extended amounts of coverage, most renter’s insurance policies in Maryland don’t cost more than $22 per month.
Use Bay Management Property Managers
If you need a little extra help getting all the details together, hiring the help of a local property management professional can eliminate this worry. With a property management company like BMG, we can gather everything that’s needed to help you to determine which coverages you should require from your tenants. We can even ensure all requirements are clear within the rental listing and lease agreement, and request proof of continued coverage once your tenants move in, so you don’t have to. Requiring renter’s insurance protects both you and your tenants and requiring proof of coverage benefits you both. If you’re ready to get started, contact our Howard County Bay Property Management Group team of experts today!