Most renters are understanding when it comes to some of the associated costs of renting a property, including paying their portion of the electricity, water, and sewage bills. Asking renters to foot the bill for these types of expenses is viewed by most tenants as pretty standard practice. But what about when you want to include an additional requirement, such as renters insurance? According to the Insurance Information Institute, fewer than one-third of tenants carry renters insurance, which can shield tenants from liability if someone is hurt on the premises and can also reimburse tenants who have experienced lost or damaged property as a result of a fire, theft, or vandalism. If you’re a landlord who wants your tenants to buy renters insurance, you might be wondering how to best approach them about it.
Tenants might misunderstand the value in renters insurance and see it as an added expense that only benefits the property owner. And in smaller markets where housing is in less demand, or where good relationships with tenants are difficult to find, some property owners might be hesitant to try to force tenants to purchase this valuable insurance as part of the rental agreement.
However, in most cases, it is completely within the property owners’ rights to require renters insurance. To help avoid resistance from tenants, it’s important to help them understand not just why you require it, but how it can benefit them and just how affordable it is to purchase.
It Is Usually Legal to Include Renters Insurance as Part of the Lease Agreement
In almost every U.S. state, it is legal for you to require your tenants to purchase renters insurance. You’ll most likely find that putting this requirement in the rental agreement will result in less resistance than if you try to introduce it as a requirement later.
The only exceptions are Oklahoma, where you cannot mandate renters insurance from your tenants, and in some municipalities nationwide that disallow this requirement for low-income and rent-controlled housing.
Explain What Renters Insurance Does for the Renters and for You
When you go into detail about renters insurance with your tenant, provide some information to help your tenants better understand the usefulness of it. Tenants who are first-time renters might have a hard time understanding the need for it, but there are a few easy ways to make the subject more digestible.
Be Upfront About Your Policy
Honesty is the best policy when it comes to renters insurance. Most tenants respond well to clarity and transparency, so it’s best not to hide your renters insurance policy deep within the lease agreement, and then only broach the subject later after the lease has already been signed.
Instead, go over all of the rental agreement requirements with your potential tenants, piece by piece, and explain what each cost entails.
1. Focus mostly on how renters insurance protects tenants
Some tenants might not understand what renters insurance covers. They might assume it’s designed to protect you from them. That can be true when it comes to the liability coverage portion, but you might want to start the conversation with the coverage areas that protect renters.
- Help them understand that renters insurance will pay for their property if there’s a fire, theft or other covered events.
- Make sure to let them know that your property or landlord insurance policy does not extend to them, so if anything happens to their personal belongings, your insurance won’t help them.
- Let them know that if your rental property becomes unlivable due to a covered event, their renters insurance will pay for temporary housing, such as a hotel.
Also, explain your role in ensuring that your renters are protected. That can include the ways you take proactively to keep the home safe against the type of threats covered by the policy.
If you happen to have any anecdotes, it may be beneficial to use them as part of your explanation. Sometimes tenants can better visualize what renters insurance can do for them if they hear real-life stories of tenants who benefited from renters insurance.
Try to avoid negative stories that focus on tenants who failed to purchase insurance and regretted it later. This tactic may come off as highly manipulative. If your lease already requires the purchase, your goal is to help prompt that purchase more positively.
2. Elaborate on the low cost
Some tenants, and especially first-time renters, might be wary of the potential cost for renters insurance. Much of that apprehension is because many don’t know how inexpensive it is to purchase, and they might mentally compare the cost to other insurance products they’re required to carry, such as car insurance and health insurance. In actuality, renters insurance, even in the most expensive states like New York and California, is usually around $200 annually (compared to home insurance which exceeds $1,360 in places like Los Angeles!).
This is a good opportunity to help tenants understand just how inexpensive renters insurance is, and help walk them through the process of where they can obtain it inexpensively. Most car insurance companies offer renters insurance at low rates and tenants can include that alongside their car insurance, for example. Otherwise, you might be able to provide some details on insurance companies you’ve researched yourself or that you’ve partnered with and trust.
3. Be clear about how renters insurance helps you, the landlord
As stated, you will want to be as clear and transparent with your tenants as possible. Part of the discussion needs to be on the two areas of renters insurance that protect you:
- Liability coverage for at-fault accidents in the home
- Third-party property damage
When approaching this part of the discussion, make sure to help the tenants feel trusted. While you might have had untrustworthy tenants in the past, treat new tenants as unique individuals, even if they’re coming with a less-than-ideal rental history. If tenants feel you don’t trust them to make the right decisions, they might be more hesitant to purchase insurance or rent with you.
4. If your mortgage lender requires proof of renters insurance, bring that up too
Most tenants want to be responsible. If your rental property is still mortgaged, and the lender requires proof of renters insurance, make sure to address this with your tenants. Some tenants who are hesitant or resistant to purchasing it may be more amenable if they understand it’s not just something you’re requiring of them, but something you’re required to ask of them.
5. Add renters insurance verification to a “move-in checklist”
Some tenants might need a reminder to purchase renters insurance prior to or shortly after moving in. One way to approach this issue is to include the renters insurance purchase and verification as part of a move-in checklist.
That checklist can include items such as setting up utilities, doing a property walkthrough to make sure appliances are working, and of course, purchasing renters insurance and sending verification to you via email.
Avoid Threatening Behavior and Statements
Many landlords put renters insurance requirements in their lease agreements, but then don’t enforce it. If the tenant agreed to pay for it as a part of the initial agreement, don’t be afraid to follow up.
Although it might be within your rights to evict tenants for failure to purchase renters insurance if you require it in the lease agreement, it’s best not to use that as a method to gain compliance.
Instead, focus on the positive reinforcement methods mentioned above, and come back to the topic regularly if your tenants have failed or forgotten to purchase the insurance.
This article has been contributed by Maxime Rieman Croll from ValuePenguin.