The Ultimate Guide to Renters Insurance

Written on November 24, 2015 by , updated on December 9, 2016

Renters InsuranceAlthough I have a clause in my standard lease that requires tenants to get renters insurance, I have yet to rent to anyone who is excited about buying it.

For most tenants, it’s a formality. To them, it’s just one more expense. Most tenants don’t realize the value of renters insurance until they need to make a claim.

Most tenants don’t realize the value of renters insurance until they need to make a claim.

Since a homeowner’s policy won’t cover a tenant’s personal belongings, I think all landlords and managers should require their tenants to carry renters insurance.

For the record, I require my tenants to get a minimum of $300,000 in liability, and $50,000 in personal property coverage.

My Recommended Coverage:

  • $300,000 in liability coverage
  • $50,000 in personal property coverage

What is Renters Insurance?

Renters insurance is an insurance policy, carried by the tenant, which generally provides coverage for the tenant’s personal property and liability from accidental injuries to guests and property damage.

Requiring tenants to obtain and carry renters insurance is an industry standard and best practice. “When you require renters insurance, you are really requiring liability insurance,” says Eric Narcisco, CEO of Effective Coverage.

It’s an easy way to transfer risk away from the owner.

Best of all, renters insurance is very affordable, typically about $15-$20 a month, and is available from all major insurance companies.

However, some municipalities do prohibit owners from mandating renters insurance policies for tenants in rent-controlled buildings. In that case, requiring renters insurance might be more trouble than it’s worth. However, you certainly could still recommend it and make the tenant sign a liability waiver if they choose not to obtain it.

Note: For renters insurance to cover your tenant’s stolen property, you (the owner or manager) must provide at least the minimum security measures for your locale – such as locking doors and windows. If you don’t, you might be responsible for your tenant’s stolen property.

What Does it Cover?

When tenants benefit from renters insurance, landlords might, too … directly and indirectly.

There are multiple types of coverage with renters insurance:

1. Personal Property

Unless negligence can be proven, a landlord is usually never responsible for damage of theft of a tenant’s personal property.

Let’s say your tenant’s belongings were stolen as a result of a break-in that was no fault of yours. They will probably want (or need, depending on what was stolen) to replace the missing items.

Common high-priced items include:

  • clothing
  • furniture
  • computers
  • electronics
  • art and jewelry (sometimes with a rider)
  • appliances and
  • other belongings

Most of the time, personal property is protected from the following types of damage:

  • Fire, lightning
  • Windstorms, hail
  • Explosions
  • Riots
  • Damage by aircraft or vehicle (not your own)
  • Smoke damage
  • Vandalism
  • Theft
  • Volcanic eruption (yikes!)
  • Falling objects
  • Weight of snow, ice, sleet
  • Damage from steam-heating/water-heating appliances/systems
  • Leakage or overflow of water or steam
  • Freezing of plumbing, heating, air conditioning
  • Short-circuit damage caused by electrical appliances

If your tenant didn’t have renters insurance, they’d have to shell out for all those items. And if they’re living paycheck to paycheck as 76 percent of Americans do, they might not be able to afford to pay the rent and replace their belongings.

If you require your tenants to have renters insurance, you help ensure that your tenant will be able to pay the rent and replace their belongings.

2. Loss of Use

Along those same lines, if your property were damaged from a natural disaster, such as a flood, storm, or fire, your tenant will probably need to move out while repairs are being made. Renters insurance would pay for a hotel. But if your tenant didn’t have renters insurance and couldn’t afford a hotel, they might make other arrangements and could be less likely to return to your property.

Related: The 6 Most Important Clauses in a Landlord Insurance Policy

3. Liability

The liability part of renters insurance, the part of most interest to landlords, which Eric Narcisco mentioned earlier, kicks in when the tenant messes up, such as by causing a fire by smoking or leaving a pot cooking on the stove overnight.

The security deposit probably won’t cover those types of damage, so you’ll likely have to sue the tenant. If the tenant has renters insurance, their insurance company will pay you for the damages, assuming the damage is caused by a covered incident.

Liability insurance also covers injuries sustained in the property that were the tenant’s fault, such as someone falling because of clutter on the floor or the tenant’s dog biting someone.

Related: Why Landlords are Liable for the Personal Injuries of Tenants

4. Medical Payments

Liability coverage will also cover medical costs associated with an injury of a guest – although it won’t cover medical costs of the tenant or household members.

5. Third-Party Property Damage

If a tenant accidentally damages another property or dwelling, the other owners might come after you (or your home insurance) if your tenant does not have a renters policy. Damages to neighboring properties are more common than you would think. Some common examples are:

  1. Overflowing a sink/bathtub/waterbed and causing water damage to the unit below
  2. Unapproved renovations gone bad
  3. Driving a car or lawnmower into a fence
  4. Bottle rocket catching fire to a neighbor’s roof
  5. Outdoor grill accidents/propane tank explosions
  6. Stray baseball through a window

It Can Be a Hassle

It definitely can benefit everyone if tenants carry renters insurance, but the administration aspect can be a pain. You’ll need to “require a certificate, track the coverage, and make sure the insurance is active the whole tenure,” says Narcisco.

The best practice is to get a copy of the policy or proof of coverage once a year, and get the policy to align as closely with the lease as possible. Do that by requesting your tenants have renters insurance by move-in day or shortly after, such as within a week or two.

If you mandate renters insurance in the lease, failure to obtain a policy can be considered a lease violation, and therefore grounds for termination.

A Recommended Lease Clause

Whether or not you require your tenants to have renters insurance, you certainly want to let your tenants know that your landlord’s insurance policy won’t cover their belongings (unless they were damaged or stolen as a result of your negligence).

Many renters don’t know this and are under the mistaken assumption that your policy covers their stuff. Maybe that’s why only 31 percent of renters have renters insurance.

Note: Please have a local attorney review the clause above for your own usage. Each state has its own rules regarding insurance. Please know that we are not lawyers, nor do we provide legal advice.

Help Your Tenants Help Themselves

Many tenants don’t know that renters insurance even exists, nor where to buy it. If you require or suggest that they purchase a policy, help them fulfill it.

When my tenants ask, I suggest one or all of the following:

  • Check with your auto insurance company – they can likely bundle it for you.
  • Use any other major insurance carrier.
  • Use a recommended and trusted insurance agent whom you already have business with.

The largest and leading renter’s insurance companies are:

Do you require your tenants to carry renters insurance? Let us know in the comments below.

This article was co-written by Lucas Hall and Laura Agadoni (view all Laura’s articles)

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19 CommentsLeave a Comment

  • Vivian rodriguez

    Need help is changing marking spaces arrangement on tenants too many cars not enough spaces whet notice can I give n how many dsys

  • Katie

    We don’t require our tenants to carry renter’s insurance, but we highly recommend it to them and offer a kick back of our insurance discount if they do, which is about $10.00 a year back to them. Not a big kickback, but our way of thanking them as they save us money on our insurance when they have it. Currently, we have 3 of 4 that carry it, but often it is 50/50. We have found that those that don’t have it coming in, don’t get it once in. Those that have it, had it before they moved to us.

    • Lucas Hall

      Hi Katie!

      Thanks for sharing! I’ve found the same to be true. Great tenants typically see the value in renter’s insurance, and already have it before I meet them. The less than favorable tenants are those that gripe about getting insurance.

  • George Lambert

    I don’t require renter’s insurance, although I do suggest it. And if they don’t get the insurance, I’ll throw it in as a bonus when it’s time to renew the lease with an increase in rent.

    George Lambert
    Author, What You Must Know BEFORE Becoming a Greedy Landlord. How to build a portfolio of investment properties for an income that lasts a lifetime.

  • Hazel Adams

    It is interesting for me to learn a little bit about renters insurance. I did not realize that I needed it so badly. Where do you suggest I look for the best renters insurance?

  • Nancy

    Will any insurance company NOT rent to me since I live in an illegal basement apartment in a single family home? Landlord is absentee and there are other tenants upstairs from me. I live in East Meadow, LI.

  • Slug

    In a roommate situation does each adult need to have a separate policy? Or is there one policy that can cover multiple un-related adults?

    • Lucas Hall

      Usually, yes. This is because your personal property is yours, not your roommates. Although you can talk to your insurance provider about sharing a policy with your roommate. They might have a combined policy for that.

  • Alan Bolden

    As a home owner in Florida, When i rent out my home to renters what kind of insurance am i required to have, Does my house have to have home owners insurance even if its paid for ?

  • Gail Bollinger

    So separate from the renters insurance for property my lease stipulates that I must have a separate public liability policy that provides 1,000,000 for death or injury and 1,000,000 for property damage naming my landlord as additional insured.

    I had this type of coverage previously with a commercial rental policy but never for an apartment. The insurance company I am working with says they can provide this coverage with my renters policy but it’s not for the landlord’s liability but mine. Are you familiar with this type of request that in addition to renters personal property and liability that a separate public liability policy be purchased by tenant naming landlord as additional insured?

    Thank you!

  • Naomi M.

    This was very helpful! Thank you. I am not sure if you are still checking this thread, but I have a question. Is it common for management companies to also require that they be listed on the insurance policy? My parents are looking to rent a place that is requiring a $300K policy AND their name added onto the policy. This seems strange.

  • Paul Malone

    Can a landlord require tenants to purchase a specific renter’s insurance policy from a specific insurer and require the tenants to pay the monthly premiums as part of the monthly lease payment?

  • Dee

    Can an apartment complex control the amount of renters insurance i take out?
    Example: i have 100thousand they want me to have 500 thousand In personable liability? Is this legal in the state of KY?

  • Steve Bach

    How Lease language should I use requiring the Tenant to provide a certificate of insurance, including naming me as the landlord as an “additional interest”. Thanks for your help.

  • Michael

    Waiting on a dispute between me and landlord deciding what caused malfunctioning of the stove. The landlord is now waiting for fire dept report. They replaced the stove already but will probably come after me. Luckily I have renter insurance. Should at this point I go and share with the landlord my insurance policy detail? or wait till they decide if it is my fault?

  • Carlos

    Can LL ask renter’s insurance for any damages that tenant caused exceeding security deposit at the time of checkout? If not, what if court found Tenant guilty, can LL ask Renter’s insurance to pay?

  • Geri Anderson

    Is it legal for a landlord to tell you how much liability that you much purchase for your Rental insurance policy? What if I can’t afford a $100,000 Renters insurance policy on a small SSDI monthly stipend? Thank you for your feedback in advance.

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