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Why Your Peculiar Tenants Need Renter’s Insurance

If you are a real estate investor in Peculiar or any other area, you already know that having renter’s insurance helps to protect the personal property of your tenants’ in the case of theft, an accident, or other unforeseen incidents.  However, did you know that having renter’s insurance also protects you, the owner, and your rental property?  There are many reasons every tenant should have renter’s insurance. However, from an investor’s perspective, the best reason for renter’s insurance is to protect you, the investor, from any liability based on the actions of your tenants. Below we will outline the benefits of renter’s insurance and the reasons every landlord should require their tenants to purchase it. 

What is Renter’s Insurance

The insurance policy you hold on your property covers the property in the case of loss or damage, whereas renter’s insurance is a type of policy that your tenant needs to purchase to protect themselves and their personal property.  Rental insurance can be purchased by anyone that is renting a home, apartment, condo, or any other living space.  

What Are the Benefits of Renter’s Insurance?

There are many benefits of renter’s Insurance, and with all insurance policies, the benefit only comes when an issue arises.  One of the big problems that are common for landlords is the loss of rental income when a tenant experiences property damage or theft.  In some cases, when the damage is extensive, the tenants may need to move out of your property until the damage is fixed.  When this happens, some renter’s insurance policies will pay for the cost of a hotel while the property is being repaired.  

home break in

What Does Rental Insurance Cover? 

Rental insurance is similar to a homeowner’s insurance policy.  Depending on the policy that your renter chooses, it will cover things such as a loss or theft of a tenant’s personal property and any damage they may cause to someone else’s property. Additionally, many policies cover accidental injuries that occur for your tenant or guests that visit them.  Some policies may also cover things such as food loss as well as a stay in a hotel if needed.  Below is a high-level list of things that may be covered under a rental insurance policy:

  1. Loss of property due to theft
  2. Negligent destruction of property (the tenant’s property or the landlord’s property)
  3. Liability expenses due to injury
  4. Damages caused by natural disasters

Rental insurance does not cover the rental property itself.  Any buildings or structures would be covered by the landlord’s insurance policy.

accident coverage for renters

Why Do I Need to Require My Tenants to Have Rental Insurance?

You may be thinking it does not affect you in any way if a tenant experiences a loss or theft of their personal property. However, a loss experienced by a tenant could end up being a problem if they decide to take you to court and sue you if they are not able to afford to replace the property that was lost or stolen.  Or worse, a tenant, a tenant’s pet, or a guest of the tenant accidentally injures themselves or someone else on the property.  These situations could place you as the focus of a personal injury lawsuit.  Although you may not be liable for your tenant’s personal belongings or the medical costs for an injured person, a lawsuit can be costly and time-consuming.  The most cost-effective approach is to prevent lawsuits from ever happening.

These reasons alone are prime examples of why it is so important to require that your tenant’s purchase renter’s insurance for the duration of their lease.  It is advisable to include language in your lease agreement that clearly defines the rental insurance requirements.  Also, it is a good idea to require that your tenants show proof of coverage before they sign a lease and move into your property.

rental agreement

You may also consider a clause that indicates if a tenant lapses their coverage, insurance will be purchased for them at their expense and added to their rent.  This allows you to hold them responsible for breaking the terms of the lease agreement.  

A few additional reasons to require your tenants to purchase a rental insurance policy are as follows:

Allows You to Be a Pet-Friendly Landlord

Based on a survey performed by the American Pet Products Association (APPA), 67% of households in the United States, which equates to approximately 85 Million Families, have a pet or pets.  By requiring your tenants to have a policy that includes pet liability, your selection of potential renters is increased.

Decrease Your Risk of an Increase in Insurance Premiums

If your rental property experiences a loss, if a renter does not have a rental insurance policy, as the property owner you are stuck either paying out of your pocket to fix damages or filing a claim against your insurance.  After filing a claim, you are at risk of your insurance premiums being raised or even having your policy canceled. 

insurance claim renters insurance

By requiring your tenants to have rental insurance, their policy may cover a portion or even all of a loss that might occur.  This allows you to lower your risk of your premiums being increased.

What Does Rental Insurance Cost?

For a basic renter’s insurance policy in the state of Missouri, a tenant will pay an estimated average of $120.00 to $200.00 per year, depending on the property value and where the property is located.  A basic policy may look something like the following:

  • $10,000.00 Coverage for personal property
  • $100,000.00 in liability insurance
  • $1,000.00 medical payout per individual per accident that occurs

While this may seem like an adequate amount of coverage, replacement costs, costs of repairs, and medical expenditures can quickly add up.  It is suggested that a renter carries at a minimum the amount of coverage needed to replace their personal property.  

In Closing

The state of Missouri does not require that renters have rental insurance, however, most real estate investors or landlords understand the value and that it is in their best interest to require their tenants to have a rental insurance policy. By making this a requirement in your lease, you are protecting the tenant as well as yourself and your investment.  If you are a residential real estate investor and would like more information on renter’s insurance requirements and policies in your area? Contact Real Property Management Consultants at 816-207-0750 today!

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