Christine Jones, CIC, ACSR
Alvarado Pacific Insurance Services
Renters Insurance: A Risk Management Tool for Property Owners
Why landlords should require their tenants to carry Renters Insurance…
Landlords, like most business owners, are in business to make a profit and protect their assets. One key component of Risk Management is the transfer of risk through insurance and responsible property owners properly insure their property against general liability and property exposures. What is commonly overlooked is the transfer of risk through a tenant’s personal liability policy. Tenant liability products protect them from third party claimed damages caused by fire, smoke, explosion or water as a result of their negligence. These causes of loss tend to be the most expensive damages an apartment building owner would face. Owners of apartment buildings face an increasing number of common, small property losses that usually fall below their own deductibles. Owners can become tired of paying for small common losses to their buildings when their tenants negligently cause damages and requiring their tenants to provide their own Renters Insurance policy is the solution. This important coverage also provides protection for the tenant if they are accused of accidentally causing injury to someone and is a vital component of keeping positive relationships between the tenants and the building owners.
In addition to the liability protection for negligently caused property damage or bodily injury, most Renters Insurance programs offer personal property coverage for tenants. Many property owners face demands from angry tenants to pay for property stolen from or damaged in or around their apartment community. Personal belongings of tenants are not covered by the landlord’s insurance policy, a common misconception by the average tenant. A tenant’s property is not only exposed to potential damages caused by other tenants in the building, but also damages they may cause themselves or even theft. If those tenants had renter's insurance that included property coverage, their policies would respond to many common causes of loss including theft, fire and water damage. A tenant with their own insurance is less likely to sue their landlord in an attempt to recover their property. Plus, they are better able to pay their rent if they don’t suffer a financial hardship due to a loss because they spend their rent budget replacing necessary items that were lost. Having funds available to replace lost items will reduce the strain on your relationships with your tenants.
Furthermore, many policies include coverage to remove and properly dispose of the tenants damaged property. What’s to keep the tenant from walking away from a unit full of burnt items, leaving the property owner to clean up the mess behind them? What if their dog or a guest’s dog bites another tenant? What if they invite friends over and they trip over that toy car and break a bone? What if they negligently cause a fire in their unit which damages not only their unit, but their neighbor’s property as well? These are the types of losses that would typically be covered under the Liability portion of their policy. What if a tenant caused a fire that displaced other tenants in the building? What if a tenant had water damage and their unit is no longer habitable? These types of losses would be covered under a tenant’s personal property policy and provide them with additional living expenses until they were able to return to their apartment.
So what’s keeping every apartment building owner from requiring their tenants to provide their own Renters Insurance policy? Is it the cost to the tenant for providing the policy? Do they think they might lose a tenant over the lease requirement? The average Renter’s Insurance policy can be purchased for under $20 a month to protect them from unforeseeable exposures such as fire damage, theft or other natural disasters. Renters Insurance provides a sense of security for the tenants that can only be guaranteed if the owners require them to have it. For a small amount of money each month, an apartment building owner can protect their own assets from damages negligently caused by their tenants and their tenants can shield themselves from the devastation of losing valuable items without the ability to replace them. The solution is Renters Insurance.