Only one-third of renters in America have renter’s insurance. Who’s fault is that? Surprisingly, the answer in some states might be the landlords. In many cases, state rental laws allow landlords to require renter’s insurance- and some even necessitate it. It makes sense. In many professional industries, insurance is a needed when there is risk involved- and being a landlord can be a big financial risk. For instance, mortgage companies require property owners to carry insurance if there is a loan so the property is protected from potential loss. Landlords can do the same thing. Here’s why you may want to think about adding a renter’s insurance clause to your lease.
Why require insurance?
There are two reasons. First, if a renter is negligent, the renter’s insurance pays the claim so the landlord’s policy won’t have to. Recently a renter in West Jordan, Utah left a candle burning. The fire it started caused $15,000 damage. The renter’s policy paid the claim. Renter’s policies cover damage caused by tenant negligence.
Second, landlords who require renter’s insurance also become a hero to tenants who have a loss due to a fire or flood that was no one’s fault. One tenant I know tearfully told their landlord that they just got a $22,000 check from their insurance company and they were so grateful the landlord required them to carry insurance because they would never have done it on their own and they would have lost all their stuff with no money to replace it if it weren’t for the landlord. Renter’s insurance is relatively cheap for a tenant and can mitigate huge losses that are no one’s fault.
So what should you require of tenants?
The first step is requiring renter’s insurance, but it goes deeper than that. Professional companies that require insurance do not give the keys to a property until the tenant provides them a copy of a policy that the landlord’s name has been added to. The landlord’s name should be on the policy in case a tenant is unavailable or uncooperative in filing a claim. With their name on the policy, the landlord can file a claim themselves.
Also, requiring your name be on the policy as an “additional insured” or a “party of interest” has the added benefit of assuring that if the policy is canceled or not paid that notice will be sent to the landlord. Landlords then serve a “Three Day Notice to Perform Covenants of Lease or Vacate” to the tenant which requires premiums be paid to avoid eviction.