Most tenants understand the benefits of renters' insurance. For a few dollars a month, tenants can protect their personal property and limit potential legal liability.
As a landlord, does requiring renters' insurance help you in any way?
Here are six reasons you should insist that every renter picks up an insurance policy before you hand over the keys.
1. Attract Responsible Tenants
One of the hardest parts of being a landlord is finding high-quality tenants. You want residents who will pay rent on time, take care of your property, and not cause problems for other tenants.
If you make it clear that your property requires renters' insurance, some less-than-savory applicants will screen themselves out of the application pool, making your job easier.
Renters' insurance is incredibly affordable, so any applicants who tell you they can't pay the insurance premiums will likely struggle to pay their rent, which is useful information for you to know before signing a lease.
2. Lowers Your Potential Expenses
Living in Florida means sunny weather, convenient access to beaches, and the occasional natural disasters. Between hurricanes, floods, and accidents like an electrical fire or water damage, you're always running the risk that your property will be damaged and you'll be forced to provide alternative lodging for your tenant.
Even if you have a small electrical issue, your local electrician may recommend that your tenants temporarily move out. Paying for a hotel room for your tenants can run you $100 or more per night, meaning your annual profits from a property can quickly vanish.
Renters' insurance protects your investment by paying the cost of temporary lodging in the event of a natural disaster or accident.
As an added bonus, if your tenant is unhappy with the accommodations, it's the insurance company's problem to fix, not yours. You'll be able to concentrate on getting your property repaired rather than answering calls from a tenant who wants to complain about the hotel's room service.
3. Limit Legal Issues with Your Tenants
Being the victim of a crime is a terrible experience, and it brings out the worst in people. If your tenants are robbed in their own home, they might lash out at you. After all, the robber is long gone, and you're a convenient target.
You don't want to be dragged into small claims court by a tenant claiming your negligence led to the loss of a flat-screen TV, laptop, or family jewelry. If your tenants have renters' insurance, you can point out that filing a claim with the insurance company is much quicker and less contentious than filing a lawsuit against you. You could even lend a helping hand to ensure your tenants leave you out of their legal problems.
4. Makes It Easy for You to Accept Pets
Most tenants want to welcome a dog or cat into the family. As a landlord, you can attract more tenants (and charge higher rents) if you're willing to accommodate pets. However, pet deposits don't come close to covering the potential costs of replacing an entire unit's carpeting due to urine odors or paying out a settlement after Fido tears off a chunk of the mailman's leg.
If you require your tenants to obtain renters' insurance that covers damage to property or personal injury from pets, you won't be stuck paying the bill for someone else's pet.
Also, many insurance companies have breed exclusions. If you don't want bully breed dogs in your property, tell applicants they can only move in once they find an insurance company that will cover their dog.
The applicant will never be able to satisfy your requirements, and you won't have to argue with dog lovers who insist their precious pooch would never hurt anyone.
5. Lower Your Own Insurance Costs
Although insurance is there when you need it, sometimes you can run into long-term negative financial effects if you make a claim. Your company might raise your rates or even drop your coverage completely. Even if neither of those things happens, you'll still have to pay a hefty deductible before you can use your owner's insurance.
If your tenants have renters' insurance, you can shift this financial burden to them. After all, when your tenants leave the bathtub running for 24 hours or forget to lock their front door and fall victim to a burglar, why should you have to pay a financial penalty for their carelessness?
6. Reduces Turnover
One of your biggest expenses as a landlord is unit vacancy. You want to find good tenants and keep them – and their rent – around for years. When tenants encounter unfortunate events, like crime, damage to their units, or natural disasters, they may be tempted to pack up and leave. However, if they have renters' insurance, they'll have to stick around to get help from the company.
If you need to remodel or upgrade the unit after it's damaged, you can solicit input from the tenant, since you'll be renovating with funds from the tenant's insurance company. If the tenant is extremely valuable, you could even offer to pay the deductible to make sure the tenant stays with you for the long haul.
You've invested so much in being a successful landlord. While you can't force your tenants to value your property as much as you do, you can -- and should -- require every tenant to purchase renters' insurance.