Why Landlords Should be Talking to Their Tenants About Renters Insurance

Most tenants assume that their landlord’s homeowner insurance will cover their losses. This is largely incorrect. In fact, most policies will not cover costs of the tenant’s belongings at all. As a landlord, you should be advocating for your tenants by encouraging them to get renters insurance. These are some of the questions they may ask about the process.

Do Tenants Actually Need Insurance?

An increasing number of landlords are requiring that their tenants purchase rental insurance. It’s required because landlords don’t have the coverage for their tenant’s personal belongings.

When renters hit a certain status in life, they’ll have accumulated things like a television, media equipment, furniture, computers and other big purchases. All of those items will need to be replaced in the event of a fire or theft. Tenant’s are often surprised by how much they actually have until they’ve lost it. As a person starts to acquire belongings, they should become serious about protecting those belongings.

What Does Renters Insurance Cover?

An insurance policy will cover a variety of scenarios depending on the type of coverage a tenant purchases. For example, the tenant goes to work one morning and comes back in the evening to find that a thief has broken into the home and stolen all her valuables. It’s likely that her policy will cover the replacement of those objects like the television and her jewelry. It can cover electronics, furniture, jewelry and liability in case of an accident in the tenant’s unit.

How Much is Renters Insurance?

The cost of a renters policy will vary depending on the insurance company and whether the tenant has car or life insurance that can be bundled with the renter’s coverage. If they don’t have either kind of policy, it can cost between $100 and $500 per year. This cost will vary by location as well as the value of their belongings, and how much coverage they’d like to purchase.

What Kind of Disasters are Covered?

These are a few of the disasters that can cause loss that are covered. The policy will be specific about its coverage.

Damage by an aircraft
Vehicle damage
Fire, smoke or lightning
Theft
Riot or commotion
Weather conditions like a windstorm, hail or weight of ice or snow
Damage from water or steam from household appliances or HVAC

What Does the Policy Cover in Liability?

Liability is a standard item covered in renters insurance policies. If a visitor is injured in the tenant’s unit, the policy will cover court and legal expenses up to the dollar amount in the policy itself. It’ll also cover expenses if the tenant himself is injured as well as anyone else living in the home who is on the policy.

How Much is Renters Insurance if it Covers Loss of Use?

There are times when the tenant’s apartment becomes uninhabitable. If it’s one of the covered problems, the renter’s policy can reimburse for expenses if the tenant has to live elsewhere for a period of time. It might even cover replacement of food and other expenses. The policy should explain what is covered under “additional living” expenses as well as how much will be paid to the tenant. This is often part of the standard coverage, but it might require more in premiums for extended expenses to be disbursed. The insurance agent can give the tenant-specific details based on the policy chosen.

Does Rental Insurance Cover Belongings When a Tenant Travels?

When a policy covers personal belongings, those items do not have to be in the home. They can be in the tenant’s car whether they’re traveling to work or on a road trip. It can also cover the items when they’re in the tenant’s possession on a trip anywhere in the world. The coverage includes theft if they’re stolen from the hotel room in another country. It’s important that a tenant with a renter’s policy checks it before traveling to ensure they have the right coverage.

What Does Renters Insurance Cover in Replacement Costs?

When the insurance company talks about replacing a tenant’s belongings, they usually mention either replacement cost coverage or actual cash value. The replacement cost coverage, or RCC, will replace an old item with a new one. For example, it’ll replace an old television with a new one at today’s rates. The actual cash value, or ACV, will only give the tenant the reimbursement of the value of that old television. For a policy that will give the tenant the RCC of his or her items, the tenant will have to pay more.

How is Value Determined?

The tenant will have to do a home inventory before purchasing the policy. Often, people undervalue or underestimate the amount of belongings they have, so an exact accounting is vital to knowing the value of items, and how many the tenant actually has. A video accounting is one of the best ways to catalog all the items in a person’s home. It can help because the tenant can video the serial numbers on the backs of items as he travels throughout the rooms of the apartment. Video is unlikely to get lost as long as it’s stored in the cloud.

Landlords should think about requiring tenants to have a renter’s policy since coverage and premiums can be high for a landlord with multiple units. It’s hugely beneficial to the tenant to have a policy amount that will cover all their items, which isn’t the case with a landlord’s insurance policy.