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Return To: Landlord Insurance – The Ultimate Guide
Many landowners are not aware that renter’s insurance exists. It is a fact that’s especially true for new landlords who’ve yet to navigate the ups and downs of handling a rental property. Many unexpected things can happen to tenants even after you’ve examined them. They can suffer a financial setback which affects their monthly rent.
Property losses are also more common than you think. Insurance coverage is one of the factors to help protect against unexpected events, and every landlord will have them. Whether your rental portfolio is a single family home or large apartment complexes, renters need insurance.
What Does a Renters Insurance Policy Cover?
When someone begins to rent a property, there is a chance of loss and liabilities. If you do not prepare for the financial impact of these events, it can take away all your profit. These damages can add up, and you can even end up in a problematic legal situation. When you have renters insurance, it covers the following:
| Issue | Coverage |
| Property damage | Your insurance covers any damages up to the limits of the policy. |
| Pets | Insurance covers any property damage a pet may bring. It will also protect against costs that occur when a bite happens. A dog bite claim can cost tens of thousands of dollars, and it will protect your tenant from a sudden financial loss. |
| Medical | The policy can cover the costs of medical treatment for anyone injured on the property up to the limit. |
| Unexpected loss | There might be events that can leave your property uninhabitable. If you have enough insurance coverage, you can reconstruct the space without any cost. It can help any renters who become forced out of their homes due to calamities and the like. |
Whether through theft or some unexpected event like a hurricane, property losses can go up to staggering amounts. From 2014-2018, the average claim for homeowners insurance losses reached over $13,000.
Remember that the policy will detail how much it covers for each scenario. Some may not have coverage for certain conditions like floods or pets. Landlords should understand the limits in the insurance and that tenants should too.
Having Renters Insurance Brings Added Benefits
While renters insurance brings protection from the financial costs of unexpected events, there is a lot more value that one can have. Renters insurance covers the tenants’ personal possessions and also other valuables within. It’s not uncommon for them to provide coverage for collectibles and electronics. These add-ons are what companies use to help their product stand out.
Renters insurance can also provide personal property coverage while your tenant travel. If you lose a valuable item while on a trip, you might be able to make a claim through renters insurance. It still has limits, but it’s better than having nothing.
Other tenants also opt to sublet to help provide additional income. It can be risky for short-term renters as you’ll never know who you get. Airbnb and other rental services have grown in popularity over the last few years. Home sharing is profitable, but your guest may get into an accident or damage the property while they’re there.
Misconceptions About Renters Insurance
Many avoid renters insurance because of some wrong beliefs in regards to:
- Cost of coverage
- Need of coverage
- Amount of coverage
- Circumstances surrounding coverage
It’s all rooted back in misinformation and the lack of education on the topic. Here are several common beliefs tenants have:
It’s Too Expensive
Renters insurance may be an extra cost, but it prevents financially devastating events. A fire or flood can wipe out everything you own and leave you with almost nothing. If you don’t have insurance, you’ll have to pay and work your way up again. You can get insurance ranging from $200 to $1000 a year, divided into monthly payments. There are also ways to save money on insurance.
Liability Coverage Is Unnecessary
These statements are all true until it happens. No one expects an accident to happen while someone is at home. It could happen to a guest or the tenant. It is dangerous to think that you don’t need any form of protection from events that could wipe out your money reserves.
I Don’t Have Any Expensive Items
Many people base the estimates of the items they hold based on one or two items. They don’t account for how personal belongings can have a higher value than estimated. A two-room apartment has valuables that cost an average of $30,000. Many tenants also don’t account for the costs of cabinetry, large furniture items, and the like.
Shouldn’t the Landlord’s Insurance Be Enough?
Policies held by the landlord don’t have coverage that extends to the tenants. It usually handles structural damage. If a tenant loses personal belongings due to a hurricane, fire, or theft, the landlord insurance will not cover them. If you happen to be the cause of property damage, you will also have to pay for it out of pocket.
How Much Renter’s Insurance Should a Landlord Require?
There is no limit to how much liability insurance a landlord may require a tenant to have. We recommend that the landlord ask the tenant to have liability insurance that’s enough to cover the entire house. During the worst-case scenario, the insurance should cover rebuilding the house.
Tenants should always consider the cost of their valuables and how much they would need to replace them. If they’re not sure, then an inventory can help give a more accurate number to ensure proper coverage. The insurance provides peace of mind for both the tenants and the landlords.
Renters insurance policies in the US have an average annual cost of $180, which amounts to $15 a month. This is a small extra charge to ensure that you don’t lose tens of thousands of dollars.
Putting It All Together
Landlords should require renters insurance, and it should be enough to cover property replacement if needed. Risk is always present even in someone’s home which creates the need for insurance in the first place. Landlord insurance is different from renters insurance.
The Advisors at ALLCHOICE Insurance specialize in helping landlords and property managers protect the investment properties they own and manage! Contact one of our Professional Landlord Insurance Specialists today.