Real estate investors seem like they have to be up to their ears in insurance policies. Liability comes from every angle and owners must remain vigilant to ensure that disaster, human error, accidents and everything in between don’t bring their investments to a screeching halt.
One thing investors don’t have to worry about, however, is their resident’s belongings…right? While they aren’t your legal responsibility, owners would do well to require that their residents have renters insurance to secure their stuff.
Why Owners & Landlords Should Care About Renters Insurance
- Reduce Liability
A typical renters insurance policy can be expanded to help protect the owner, too. For instance, if a resident causes a fire that damages the property, their liability coverage can pay for the damages and prevent owners from having to make a claim on their own policy. Some of these also cover personal injuries, which is helpful for real estate investors and residents alike
- Cover Cleanup
What if the property floods and ruins all of the resident’s furniture? If they don’t have insurance, chances are the owner or landlord will be left to fit the bill to remove it all, on top of having to perform property repairs. Some policies, however, may cover not only the replacement of a resident’s personal possessions, but it may handle the removal of the ruined furniture as well.
- Prevent Legal Costs
When a resident isn’t insured, they’re more likely to look to alternatives to find compensation for their possessions. One of those alternatives? Trying to sue their landlord or the property manager. Even if they don’t win, the hassle and cost of legal entanglements is best avoided. When residents don’t have to resort to desperate measures in the event of loss, it’s better for everyone.
- Narrow the Resident Pool
We always talk about how to find good residents — and one way is to require renters insurance. It will narrow the tenant pool in a positive way and help you identify the best of responsible renters.
Can I Require Renters Insurance?
Yes, you can — just remember that you must require it for all tenants or no residents. Otherwise, you’re guilty of discrimination and can face legal charges under the Fair Housing Act.
Talk to Your Residents About the Benefits
If your prospective renter isn’t knowledgeable about renters insurance, make sure your manager can explain the benefits to them. Because renters insurance is so affordable (usually around $15 a month), there’s really no reason not to go for it.
For renters it offers peace of mind and security and for owners and landlords, an extra layer of defense for their investments.
Do you require renters insurance? Tell us why or why not in the comments.
Chris Clothier, author of The Turnkey Revolution, manages the development and implementation of sales and marketing for Memphis Invest. He helps potential investors define their purpose for investing in real estate and educates peer companies on best practices in the emerging turnkey real estate industry. He is a contributing columnist for BiggerPockets and an experienced speaker who regularly addresses audiences of real estate investors and business professionals.