Renters insurance might seem like an afterthought when managing a rental property. Some owners might think it's better to leave the choice of renters insurance up to the tenant. But there is good reason for you to require your tenants to carry insurance on their rental. It not only protects your tenants in the long term, but it also can protect your financial interests as an owner.
While Virginia state law does not require renters to have a renters insurance policy, as the landlord you can require them to carry insurance as part of the lease agreement. The payments on the renter's insurance policy can be collected as part of the tenant's rent payments. You can even include a preselected renters policy as a part of a benefits package as we do here at Chambers Theory.
There are many protections that renters insurance offers the tenant, so let’s look at those and how they also protect the landlord’s interests.
Coverage for Property Damage
Acts of God happen. Whether it be a burst water pipe, fire, or storm damage, natural causes will come along and affect us without us expecting it. This can happen in ways that renters don’t expect as well. Your landlord's insurance will cover your property, but the tenant’s possessions won’t be protected. Renter's insurance covers them for damage to their possessions.
For example, Chambers Theory recently had a property we were managing that had a pipe freeze and burst. The tenant did not winterize the exterior hose bib as required by the lease. This caused $30,000 in damages. Luckily, the tenant was covered because we include renters insurance in all of our leases. The owner and tenant were incredibly relieved.
Medical Expenses and Liability
Another source of great financial and personal strain in the event of an accident are unfortunate injuries that can sometimes result. No one ever wants to face a stay in the hospital as a result of something happening in their own home.
Luckily, renters insurance can cover a tenant's medical costs as a result of covered occurrences. They can even cover the tenant from liability if they’re held responsible for someone else’s injuries or damage to the property. This kind of protection is something your tenants can’t be without in the worst kind of scenarios.
Protection for You From Litigation
Damages to the property from natural causes are often covered by your insurance, and damages caused by the tenant are covered by the security deposit. But what happens when a tenant comes to you for compensation they feel they are entitled to due to damage? With particularly disgruntled tenants, they can feel led to pursue legal action to replace what they lost.
While these kinds of legal cases are not often successful, the cost of litigation is still present for you and your tenants. This is another worst-case scenario that renters insurance protects you from as a property owner. If a tenant has renters insurance, they’ll always have an avenue to recoup what they lose when damage occurs rather than coming to the landlord.
Relocation Expenses
With certain kinds of damage, tenants might not be able to stay on the property for some time. While relocation might be temporary, it can quickly become financially draining on a tenant. You also could potentially be held liable to cover the cost of a tenant’s expenses. Renter’s insurance will cover this cost.
Another property we managed had a tree fall directly on the home that 3 tenants lived in. The property was now deemed uninhabitable and condemned by the county until it could be repaired. These were first-time renters who had no knowledge of renters insurance when they signed the lease. Once again, they were automatically enrolled by our benefits package and they were covered.
Screening Tenants
The process of screening tenants for your rental property involves looking out for a lot of red flags. Having a thorough screening process involving proper background checks is vital. There are also things you can look for when conversing with the applicant that could inform you of how they fit with your property.
Requiring rental insurance as a part of your lease is one of those ways of potentially weeding out applicants. Rental insurance is typically a very small expense, typically around $12 in Virginia. If a potential tenant is hesitant or unwilling to carry renters insurance for peace of mind, this could be a sign that they aren’t the right fit for your rental.
Special circumstances
Life happens in unexpected ways. Neither the property owner nor the tenant can foresee some of the challenges that might be run into throughout a lease. Renters insurance is something that can be highly customized to cover the tenant in case of special circumstances, just like any other insurance.
If a tenant has especially valuable items that go beyond the limits of normal coverage, they may be able to purchase an extra endorsement for the policy to cover these items. In case of water damage from sewers or drains, water backup coverage can keep them insured from damage and water removal. Even things like pet damage and personal injury may be covered under certain policies.
Property Management and Protecting Your Tenants
For all of these reasons, requiring your tenants to carry renters insurance isn’t just possible, it’s a no-brainer. It protects you and your tenants and helps to secure the long-term happiness and success of the tenant-landlord relationship. Building this into your lease before it's signed is the right choice, and the best way to handle this is by utilizing a trustworthy property management company.
We here at Chambers Theory have made it our mission to foster those long-lasting relationships not just with our owners, but between them and their tenants as well. We always include renters insurance as a part of our benefits package because of our commitment to care for our client’s properties in every aspect of what we do.
Feel free to contact us any time to start receiving that same level of care from us with your rental property.
