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Renters Insurance 101

Renter’s Insurance is very important to have and many landlords are now requiring it. The landlords home owner’s insurance policy does not cover the renter’s belongings. Renters insurance protects your belongings in case of damage caused by fire, theft, etc., and covers you if someone is injured at your residence or sues you for negligence. It is a common choice for people who rent apartments, condos, townhouses, and really any other type of rental property.

Renters insurance does not cover the actual structure you live in.

What Does Renters Insurance Cover?

There are different types of renters insurance that cover a variety of things, but the two most common policies are personal property and liability. Ask your insurance agent about different options you may have.

How does renter’s insurance pay out?

If your stuff is damaged or stolen, or one of your guests injures themselves, you can file a claim.  If your claim is covered, your insurer will pay for the damages or losses up to the specified limits on your policy.

Personal Property Coverage

Personal property coverage will protect against theft of or damage to your residents’ personal possessions within their unit. If an electrical surge shorts out their coffee maker, it is covered. If a thief makes off with their grandmother’s jewelry, that is covered, too.

In some cases, personal property insurance will cover other people’s property that is damaged or stolen within the apartment. So, if that power surge damages a guest’s smartphone or laptop, that is covered, too.

Most policies will cover damage caused by theft, leaks, snow, freezing, smoke, falling objects, and vandalism, among others.

Depending on where you live, some companies will let you add on earthquake or sewer/drain backup insurance to your policy, as well.

What personal property coverage insurance policies will not assist with, no matter where you live, is damage caused by floods.

Liability Insurance

Liability insurance covers unintentional injuries or other harm done to someone in or near a resident’s unit. If a visitor trips on the stairs and hurts themselves, they could sue the resident for damages. Liability insurance will pay for that.

Now, we say ‘unintentional’ because it will not cover harm that your resident inflicts intentionally (not that any of your residents would do such a thing). Some policies, however, will cover intentional harm done by children under the age of 13.

In addition, renters’ insurance protects against liability regarding your owners’ properties and potential repairs related to renter-inflicted damage.

 Relocation

Finally, renters’ insurance may cover cost-of-living expenses if your resident needs to move out. If, say, lightning strikes your complex and starts a fire, your residents are covered for things like temporary relocation and related expenses.

Plus, if they are covered while you clean up the damage, they’re more likely to come back when you’re done.

Being well-informed will help you find the right company and coverage to fit your needs as well as those of your residents. 

How Much Does It Cost?

The cost of renters insurance depends on the kind of coverage that you or your resident chooses. It can vary by the state you are in, and even by ZIP code. If your property is in an area that an insurance company considers relatively safe, renters’ insurance will be less expensive.

Other variables that affect the cost of insurance include the type of unit (apartment, duplex, single-family, etc.), the size of the building or complex the unit is in, whether your resident has a pet, and your resident’s credit score.

That said, renter’s insurance is still affordable. The average policy, which includes personal property coverage, liability, and relocation, costs between $15 and $20 a month. A policy in that range will usually include enough coverage without a huge deductible.

Should My Property Management Business Require Renters Insurance?

It is within your rights to require your residents carry renters’ insurance before they sign a lease. This can set the tone with a renter right from the start—and safeguard the owner’s property. As mentioned above, there are very real benefits to renters’ insurance, including protection of personal property as well as liability about others affected by a renters’ missteps.

Master Insurance Policies

One way to comprehensively ensure all residents and owners are covered is to investigate a master insurance plan. Master insurance, in general, is a term that is often used to define a comprehensive type of umbrella insurance policy.

For example, AssetProtect from RealPage, covers both renters’ belongings and owners’ properties from damage and liability—at no additional cost to the owner. The property management company is listed as the primary insured, which also safeguards the property owner from rising premiums and the need to file a claim on their own policy.

State Regulations for Requiring Renters Insurance

Talk to your property owner clients to get their input; but in general, it is a best practice to require your residents to get renters insurance as part of the leasing process. Guidelines on this can vary by state, so make sure you check your state and local laws before making the change.

How to Implement Renters Insurance

If you have decided to require renters’ insurance, here are 3 steps that will get you on your way:

  • Understand the characteristics of your property and your residents:

Do you live in an area with a risk of flooding? Do you have any restrictions on the pets you allow? Are your residents mostly single, or do they have families? How much are residents willing to spend?

  • Shop around:

You should get a variety of quotes before deciding.

  • Educate your residents:

Invite residents to a virtual meeting or workshop to learn about renters’ insurance. If you are working with an insurance company, invite a representative to speak to your renters. They can highlight the importance of renters insurance, discuss cost and coverage, and answer any questions that your residents have.

Renters insurance is an affordable way to cover personal belongings, but do not forget about its liability insurance and coverage for additional living expenses.

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