Helping Tenants Understand The Benefits of Having Renters’ Insurance
Only a third of all tenants have some kind of insurance to protect themselves from calamity in case their possessions go up in smoke or they’re flooded out when it rains or their children burn down the house while playing with matches. Your owners’ policy would pay to repair or replace the building if something were to happen, but your policy would not cover the tenant’s possessions nor the tenant’s liability if they were found to have caused damage to the property.
This state of affairs raises any number of questions, and you should have some answers so you can help your tenants understand renters’ insurance and buy it if they wish.
Why do so few tenants purchase renters insurance?
- They erroneously believe that their landlord carries insurance which will cover them and their belongings.
- They have never given it even a first thought because nobody has ever made them aware of renters insurance.
- They think they can’t afford it.
- They think their assets are too insignificant to be concerned about.
- They’d rather gamble that the premiums which they would pay over time would exceed whatever benefits they would receive.
Why should you as a landlord even be concerned about whether your tenants have a renters’ insurance policy?
- You should show a positive, caring attitude toward your tenants whenever you can.
- Tenants who have insurance are less likely to sue their landlords after a tragedy than tenants who don’t have insurance. Tenants who have insurance don’t have to turn to you for compensation. They turn to their own insurance company for reimbursement.
What does a renters’ policy cover (some offer fire coverage only, while others offer general coverage, including fire, earthquake, and flood coverage)?
- It may cover tenants’ personal goods which are damaged or stolen on the premises.
- It may cover losses to their goods when they are off the premises, such as gold clubs or a camera stolen out of their locked car.
- It may cover them in case someone holds them up, forges their checks, or steals their credit cards.
- It may cover personal liability in case they are negligent as tenants and cause damage to the dwelling.
- It may cover personal liability for non-auto bodily injury claims brought by others.
Where can they buy a renters’ policy?
- Almost all the big general insurance companies sell it – State Farm, Allstate, Safeco, Farmers, etc.
- Tenants might start by asking the company which provides their car and home insurance policies. Always important to compare renters’ insurance quotes before purchasing a policy.
How much does it cost (rates vary by regions; one company has different rates for nine different regions in a single state)?
- Typically a renters’ policy will cost around $25 per month for $25,000 worth of coverage and a $250 deductible. Personal liability on such a policy is $300,000.
- Policies which offer minimal coverage cost as little as $100 per year.
Can they pay for it in installments?
- Most insurers offer a variety of payment plans – monthly, quarterly, semi-annually, and annually. Ask about their installment plans when you are getting renters’ insurance quotes to compare policies. There may be a service charge for the extra paperwork in billing for installment payments.
What discounts are available?
- Discounts are available for those who have any combination of the following – dead bolt lock, smoke alarm, fire alarm, sprinkler systems, or fire extinguisher.
How can you best make your tenants aware of the benefits of a renters’ policy?
- Mention when you first rent to them that they should secure a renters’ insurance policy if they want coverage, and remind them of their exposure to risk once in awhile.
- Make them aware that their possessions are indeed worth something, probably more than they think.
- Tell them that they would be liable if they caused a fire at the property or building, and the place burned down. A renters’ policy would cover them, and also includes much broader coverage than they might think.
Are there any ways you can help them get a renters’ policy?
- You can buy a policy for them in their name and include its cost in their rent. Remember that it becomes their policy. Should they move out six months after you the paid annual premium and ask the company for a refund, they will get the refund, not you, because the policy has to be in their name.
Overall, be prudent whenever you buy insurance affecting your income property business. You’ll save on the premiums and you’ll protect your assets. Making your tenants aware of the benefits of having a renters’ policy is just one way to ensure your business, homes, and buildings are protected.