Protecting your real estate investment has to be high on your list of priorities when you’re renting out a property. One way to ensure you’re doing everything you can to safeguard the condition and value of your property is by requiring residents to have renters insurance.
This type of insurance provides coverage for personal property and liability for residents living in your rental home. It can be difficult to enforce this requirement, but we think it’s a good idea to require it from all new residents and those who are renewing their lease agreements.
Here’s why it’s important.
Renters Insurance Protects Your Investment Property
While the insurance policy that you buy will cover damages to the property itself, it does not protect any of the resident’s personal belongings or assets in the case of theft, fire, or natural disasters. Requiring renters insurance ensures that residents have coverage for their personal property, and it allows them to file any claims through their own insurance carrier rather than through your insurance policy. This is a smart way to limit your own liability while also ensuring that your residents are adequately protected.
Renters Insurance Protects Residents from Liability Claims
In addition to providing coverage for personal belongings, renters insurance also protects residents from liability claims. If a resident leaves an empty pot on a hot stove, for example, and a small kitchen fire starts, this is due to their negligence, so their policy will cover the cost of repairs instead of yours. Without renters insurance, those residents would be responsible for making the repairs on their own, and they may not have the money available for such an expense.
Making the Case: How to Educate Your Residents on the Importance of Insurance
This shouldn’t be a hard sell when you have a new resident preparing to move in. The insurance policy itself provides a lot of benefits and protections for your resident, and it’s not expensive at all. Most policies will cost between $15 and $20 a month. That’s not too much to pay for a lot of peace of mind.
Explain to the residents that if there’s a flood and their expensive electronics get damaged, your policy will not cover that loss. They should see the importance of renters insurance and they will also likely understand that it’s common in rental homes. Most places today are requiring renters insurance from residents.
This type of insurance can actually save real estate investors money over time. By ensuring that residents have insurance, you’ll limit your liability and reduce your risk. It’s less likely that you’ll have to pay for damages or repairs out of pocket. This can help you earn more in the short and long term.
Requiring renters insurance is an important and necessary way to protect your property and your peace of mind. Write the requirement into your lease agreement, and ask to see proof of insurance before move-in. You can also ask to be listed as an additional insured, which will not cost the resident any additional money, and will keep you informed when the policy renews, changes, or cancels.
If you have any questions about renters insurance or anything pertaining to residential property management in Arizona, please contact us at PURE Property Management of Arizona.
