There is one topic (among many) that is often a point of contention between landlords and tenants: renters’ insurance. Ostensibly, this type of coverage is right for both landlords and renters. It is suitable for your tenants for a few reasons:
Renters insurance is also right for you as a landlord:
Despite the benefits that come with renters insurance policies, a surprising number of tenants choose to forgo this type of protection. A poll from the Insurance Information Institute puts the number of renters without insurance as high as 37%. As a Carlsbad landlord and property manager, you should expect to see a similar ratio. The larger your real estate investment portfolio grows, the more you’ll want protection for your properties.
There are a few reasons why tenants choose to say “no thanks” to this type of insurance coverage. Many tenants believe that your insurance will cover more than just the building and liability on the property. They think that your coverage extends to their possessions and covers liability within their units. These tenants may be surprised to find that they bear the burden of replacing all of their belongings in the event of a disaster.
Some tenants feel that renters insurance is too expensive, or they may view it as a burden to manage. In California, the average renters insurance policy is $195 a year as of 2019. This cost is well under a dollar a day and should be affordable for all but a destitute household. Renters’ insurance policies can be purchased easily online in a handful of minutes. You find that many renters feel that their possessions aren’t of much value or aren’t worth the trouble of insuring. They fail to see the risk of accidental injuries in their homes or the overwhelming expense of replacing all of their possessions at once.
You’ll probably find an infinite number of reasons why tenants say no. Rather than try to persuade them one case at a time, you may consider instituting a blanket requirement for renters insurance within your lease. Is this legal, and is this a good idea?
The short answer is “yes,” even if your real estate portfolio is small. California law does not require tenants to maintain renters insurance—but it does not prevent you from requiring that your tenants have it. Remember that this does not cost you anything. You would add a condition to your lease requiring that tenants hold renters insurance policies and screen for it like anything else. It can be wise to require proof of insurance every time you have a tenant sign or renew a lease.
Don’t feel that you are putting an undue burden on your tenants, either: renters insurance protects your tenants and their possessions—as well as your investment and bank account. Remember that renters insurance is easy to acquire, and the cost is often a fraction of other forms of insurance. As always, be sure to seek qualified legal advice for any questions about your documents and requirements. Renters insurance coverage can play a significant role in how a personal injury or civil lawsuit plays out, so ensure that you (and your tenants) are protected!
You might find the notion of requiring insurance a little uncomfortable or be uncertain about where to start. Perhaps you aren’t sure what language to use in your lease or don’t know how much coverage you should require. Don’t despair! If you’ve decided that protecting your tenants and your property investment portfolio is essential, contact Raintree Property Management. We are a Carlsbad area property management company that is equipped to help you answer any of your legal or financial questions. We can help keep your lease airtight, screen tenants, and collect, so you can sit back and let your investment earn you money. Reach out online or by phone, and we’ll get to work for you!