When they lease their property, a lot of landlords do not require their tenants to have renters insurance. The important questions are whether landlords have the right to do that and should they do it? The answer to both of these questions is a definite “Yes!”
However, before you put a clause in the contract that requires your tenants to have a renters insurance policy, such as the one from lemonade.com, you should first get informed about your local or state laws.
In the case we are discussing right now, a renters insurance policy will not benefit just the landlord, but the tenant as well. It provides an additional layer of protection for landlords, but it also protects tenants in case of natural disasters or other adversities. Let’s check out some concrete reasons why all landlords should require their tenants to purchase renters insurance before signing the lease.
It Eliminates Bad Tenants
Requiring renters insurance is a great way to weed out bad tenants. Renters insurance costs between $150 and $300 a year on average, so anyone who pays rent should be able to afford it. Therefore, if you require your tenants to purchase a renters insurance policy and they refuse because they do not have the money, how likely is it that they are going to be able to pay the rent regularly?
Moreover, tenants with bad credit sometimes won’t be able to get renters insurance, which means that they are not good at managing finances. Think about whether you want to rent your property to such people — that could be a disaster waiting to happen.
2. Lets You Be Pet-Friendly
Being pet-friendly when leasing your property significantly increases your chances of finding good tenants quickly. Today, around 68% of households in the US own a pet, so prohibiting tenants from living with pets would decrease your pool of potential renters.
Renters insurance is important when it comes to mitigating liability in case of dog bites or other animal-caused injuries. Moreover, big pets are likely to cause property damage, which renters insurance also protects you from. However, before signing the lease, make sure that your tenants’ insurance policy covers pets, as this clause differs from one state to another.
3. Lowers the Chance of Your Premiums Increasing
Insurance premiums are bound to increase after each insurance claim. Therefore, limiting the number of claims is important if you want to keep your premiums in check. If you require your tenants to purchase renters insurance before signing the lease, you will significantly lower the chances of having to file a claim in case of some damages. If renters insurance covers everything or at least a portion of the loss, it is unlikely that your premiums will increase.
4. Mitigates Potential Disputes
Requiring renters insurance means preventing potential disputes that may arise in the future. It is not uncommon that landlords and renters cannot come to an agreement about who’s responsible in case of theft or a natural disaster. But if your tenants have renters insurance, it does not matter who takes the blame — the insurance will most likely cover the damages. Imagine the scenario in which your tenants lose everything and are left on the street. Who do you think they will blame first?
5. It Gives You a Peace of Mind
It’s hard to put a price on peace, but the cost of renters insurance is certainly a part of it. Knowing that there is nothing to worry about in case a disaster strikes and being able to sleep at night is definitely worth the additional hassle. Renters insurance can also improve your relationship with your tenants as you won’t be viewing them as a potential threat if things suddenly spiral out of control.
These were just the five main reasons telling you why it is important to require renters insurance if you are a landlord. There are numerous other reasons that you should consider as well; after learning all about them, you will certainly be convinced that this is the right way to do leasing. Requiring renters insurance does not mean that you are pessimistic — it means that you are responsible and you stay one step ahead of potential troubles.