How Much Renters Insurance Should a Landlord Require?

Your tenant’s belongings are their responsibility. However, many renters have no idea that landlord insurance doesn’t extend protection to the damage they cause or their belongings. As a landlord, you can help them out and build trust from day one by requiring your tenant to get renters insurance.

While it may be a selfish train of thought, requiring your tenants to secure and keep renters insurance through the duration of their lease can help you out as well. If they suffer a covered peril that damages some or all of their belongings, they may not have the extra money to replace them on their own.

A landlord should require enough insurance to ensure their tenant’s belongings and financial wellbeing are covered. So a tenant with $20,000 worth of personal belongings should be required to carry a renters policy with $20,000 in personal property coverage, $100,000 in liability coverage and enough loss of use coverage to pay for at least three months’ worth of expenses.

If your tenant has a dog, or they’ve bought a pool, trampoline or another attractive nuisance, you may want to require them to have $300,000 to $500,000 worth of liability coverage. You can even suggest they enroll in an umbrella policy for $1 million or more worth of coverage.

Whatever the dollar amount you require your renters to obtain, it needs to be enough to cover the entire amount of a claim so they don’t come after you for the remainder.

Many tenants don’t realize it, but they typically have thousands of dollars worth of possessions when they move in. Sure, the cost of furniture and personal electronics like laptops add up quickly. But when you account for shoes, clothes and any other smaller, but not quite big-ticket items, that number often doubles.

If they lost everything in a house fire or a hurricane, it could lead to the difficult decision of skipping out on monthly rent payments, which directly hurts your pockets. Sure, you could take them to court to make up for lost rent, but that takes time and costs more money. Or you could require them to have renters insurance so their belongings and financial wellbeing are protected while they’re renting from you.

That benefit of renters insurance for landlords alone should make you want to require renters insurance. But, just in case you’re still on the fence, we’ll go over a few more benefits and dig into how much renters insurance a landlord should require.

The best platform to start from is trust. While renters may be green in insurance knowledge, as a landlord, you’ve gone through the process of evaluating and buying landlord insurance. And if you’ve had to file a claim, you know first-hand how useful insurance can be.

Many tenants think their belongings are protected by landlord insurance. While it’s not your duty to let them know they’re not, you could build trust with them quickly by letting them know that’s not the case, and that they must enroll in a renters insurance policy to ensure they’re protected.

After building the trust and requiring your tenant to get renters insurance, we all hope they never have to use it. But if a covered peril, such as a hurricane or fire, damages or destroys their belongings, renters insurance will help protect their finances by reimbursing them for their belongings.

That’s much better and cheaper than them having to pay out of pocket to replace everything themselves. If they had to pay out of their own pocket, they may choose to do that instead of paying rent. No rent money from them means you have to pay out of your pocket to cover the mortgage.

But the financial protection goes a step further if they opt for loss of use coverage in their policy. If that same hurricane damage tore up your rental property enough that they have to temporarily move out, renters insurance can reimburse them for many additional living expenses they incur, including a temporary place to live.

Renters insurance can also work in conjunction with your landlord insurance to help fend off lawsuits from covered damages to their belongings and injuries that occur on the property.

If a pipe bursts in your home and damages your tenant’s belongings, their belongings would only be covered by renters insurance. Your landlord policy would never replace their belongings. Even if the burst pipe occurred suddenly and unexpectedly, your tenant could sue you to replace all their belongings.

Another scenario where the tenant, or their friends, may have grounds to file a lawsuit against you is if someone is injured on the property. If you’re found liable, your landlord insurance has liability coverage in place to help mitigate the costs. But it’ll undoubtedly increase your premiums.

If your tenant has renters insurance, their liability coverage would likely cover the claim. Even if you’re not found liable, or they’re just seeking more money than what your insurer is willing to pay them, there’s a chance they could sue you.

Things can get even murkier if you allow tenants to have dogs in your rental home and your tenant doesn’t have renters insurance. Let’s say their dog bites someone on the property, sending the person to the hospital with medical bills and, potentially, a lifelong injury.

Chances are good that you have a greater net worth than your tenant. And if you allowed the dog to live on the premises, the injured party could come after you for some retribution. While you may not be financially responsible for any of the above scenarios, going to court always takes more time and money than anyone is willing to dish out.