Many landlords want their tenants to have a renters’ insurance policy to help avoid potential disputes.
However, as a landlord, it’s important to understand whether or not renters’ insurance is required legally and what you’re allowed to require from tenants yourself as part of a rental agreement.
What Is Renters’ Insurance?
Renters’ insurance is a type of tenant insurance policy that mainly covers accidental damages to tenants’ personal property in a rental unit.
For example, if a fire, a flood, or some other type of natural disaster or accident causes damage to a tenant’s belongings, renters’ insurance pays them to replace or repair the damaged items.
How it protects renters and landlords
Renters’ insurance protects landlords as much as it does renters. This is because, in addition to paying tenants for accidental damage to their property, it protects landlords from being liable for such damages and having to pay the tenants themselves.
In addition to covering damaged property, some renters’ insurance policies also cover things like the cost of temporary housing and additional living expenses if tenants are required to relocate because of damage to the rental property.
In some cases, renters’ insurance also covers injuries to visitors or damage to their property for which an insured tenant is liable, like if their dog bites a visitor or chews up one of their belongings.
Renters’ insurance may also cover damages to other residents’ property if an insured tenant does something like leave water running that drips down into an apartment below and causes water damage.
Finally, renters’ insurance can also cover the cost to replace stolen goods. So, if someone breaks in and steals a tenant’s laptop, they may be able to make an insurance claim to replace it.
Renters’ insurance is not to be confused with landlord insurance, which typically only covers damages to the structure of the rental property due to natural disasters or other accidents.
What renters’ insurance can cover:
- Damage from natural disasters (fires, floods, storms, etc.)
- Damage from other accidents (such as a construction accident)
- Cost of temporary houses and additional expenses caused by relocation
- Injuries to visitors
- Damage to visitors’ belongings
- Damage to other tenants’ property caused directly or indirectly by the insured tenant
- Stolen belongings
What renters’ insurance does not cover:
- Accidental damage to the rental property itself
- Normal wear and tear
- Pet damage to the rental unit
Who needs renters insurance?
Renters’ insurance directly protects tenants’ property against accidental damage and other things that they might have to pay for personally, so tenants are the only people who can actually get the coverage.
But, as mentioned above, landlords also benefit from their tenants having renters’ insurance, so they often wish to make it a move-in requirement for their properties.
So, in short, both renters and landlords may decide that they need renters’ insurance to protect them against unforeseen expenses and liability.
Is Renters’ Insurance Required by Law?
Renters’ insurance is not required by law in the United States, meaning that it is up to tenants whether or not they want to get insured.
However, many tenants may find that they need renters’ insurance as part of their rental agreements.
Can a landlord require renters’ insurance as part of the rental agreement?
Landlords are allowed to make renters’ insurance mandatory as part of their rental agreements in almost all the states, except for Oklahoma.
Landlords are also allowed to set a minimum amount of coverage that’s required for tenants to move into their rental properties.
Of course, all of this must be clearly outlined in the lease and signed by both parties to make it a legal part of the rental agreement.
Why Would a Landlord Want To Require Renters’ Insurance?
Although landlord insurance usually covers accidental damage to the property from tenants or natural disasters, not everything can be covered in a landlord insurance policy.
Thus, the biggest reason why landlords might want to require renters’ insurance is to protect themselves against additional expenses that they could be liable for.
Having both landlord insurance and renters’ insurance policies in place helps ensure that landlords only have to pay for things like normal wear and tear and maintenance, rather than to cover large repairs or accidental damage to their tenants’ belongings.
For example, say there is a strong windstorm that breaks a window and then rainwater gets inside a tenant’s apartment and ruins some of their furniture.
In this case, landlord insurance would cover the cost to replace the broken window, and renters’ insurance would cover the damaged furniture. Renters’ insurance also sometimes covers the landlord’s deductible that they have to pay when they file a landlord insurance claim.
Another reason you might want to make renters’ insurance mandatory as part of your rental agreements is to help screen out potentially problematic tenants. If a tenant cannot afford to pay for renters’ insurance or is not willing to, it could be a red flag.
At the end of the day, insurance is all about peace of mind for both parties who enter into a rental agreement. Although it’s likely that you will never need to cash in on an insurance policy, you and your tenants will be happy you have it if you ever do need to make a claim.
The Bottom Line
Even though there is no law that says you have to get renters’ insurance, it’s a good idea that protects both tenants and landlords against a variety of common issues that can cost a lot of money to resolve.
Therefore, you may consider including a mandatory renters’ insurance policy in your leases going forward to avoid additional expenses and liability issues. Having sufficient renters’ insurance and landlord insurance in place will let you and your tenants rest easy at night.
