If you have invested in a rental property, you probably have already purchased landlord insurance. Landlord insurance protects you in case of a lawsuit and protects the building that you’re renting out to tenants. But as useful as landlord insurance is, it doesn’t cover everything.
Landlord insurance covers the building that your tenants are moving into—not the stuff they’re putting inside. Only renters insurance covers the personal property in each unit. While the best tenants understand the value of renters insurance, others may gripe over additional costs and paperwork. Many landlords find it useful to require renters insurance upon move-in.
As an investor, renters insurance protects you just as much as it protects your renters. Understand the key benefits of renters insurance, so you can have a productive conversation at move-in and keep the terms of your lease transparent before disaster strikes.
What Does Renters Insurance Cover?
There are two types of coverage in most renters insurance policies:
Personal property
Coverage Liability coverage
Personal Property Coverage
First and foremost, renters insurance covers the tenant’s personal property in case of a disaster. Most renters insurance policies cover everything from floods to fires to theft. Renters insurance policies don’t cover items that were damaged or stolen due to the landlord’s negligence.
Liability Coverage
What happens if a disaster damages a neighbor’s personal property? Or the tenant damages personal property?
This is where liability coverage kicks in. Liability coverage can help out a tenant if they are being sued by you or a neighbor for damages to property.
It can also help to cover medical expenses if a guest is injured on the property due to a tenant’s negligence.
How Renters Insurance Keeps Renters Renewing
If damage calls for immediate repairs, your renters may need to find a hotel or another place to stay for the time being. Renters insurance can cover temporary accommodations. Without this coverage, tenants are likely to look for a new apartment.
Things may also get tricky if your renter causes damage through fire or other means. Small damages may be covered by the renter’s security deposit, but those funds dry up quickly.
Renters insurance will cover damages that the renter would normally have to pay out of pocket. Otherwise, you may have to take the renter to court and sour your relationship.
Written by Scott Smith of Royal Legal Solutions
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