It is a really good idea to encourage your tenants to buy renter’s insurance. You can even make it a requirement of the lease. This not only benefits the tenant but also the landlord. It is important to let tenants know that purchasing their own renter’s insurance is the only way to protect their possessions in the event of a fire, water damage or other unforeseen circumstance. Many Colorado Springs property management companies make this a definite requirement in their lease documents to protect both tenant and landlord. Tenants often think that their landlord’s insurance policy would cover their personal possessions in the case of damage - which is not the case.
Why is renter's insurance important for your Colorado Springs investment property?
Top Tenants Invest in Renter’s Insurance
This is not a cost that should be hard for a tenant to cover. There are many inexpensive policies that can cost less than $20 per month. If tenants already have auto insurance, there are many that will include renter’s insurance into the deal or offer discounted options. If your potential tenant scoffs at the expense of procuring renter’s insurance this could be a tell tale sign that they are cash strapped and might not always be able to meet their rental payment on time –review their application and perhaps choose another candidate.
Mandatory Renter’s Insurance Clause
Don’t worry that insisting on your tenants having renter’s insurance will keep your unit empty. You would rather want to ensure a top quality tenant who isn’t living from paycheck to paycheck and could cause you stress in the long run. Adding a mandatory renter’s insurance clause into your lease agreement is going to ultimately protect you and the tenant. Your tenant might show their insurance policy to you at the start of the contract but a year later you should ask to see that the policy is still active. You can make the lease renewable for another year contingent on their renter’s insurance being up to date.
Avoiding Lawsuits and Claims
When your tenant has insurance it means you will have the benefit of not having to go to court in the event of a claim. If there is a problem where the tenant’s personal property is destroyed, they will usually try to claim compensation from the landlord if they don’t have their own renter’s insurance. Having renter’s insurance in place will ensure you do not have to take responsibility for the tenant’s belongings. Perhaps an injury occurs on the property and the injured party or even the hospital files a claim against the landlord. If the person has no health insurance, the landlord’s insurance might end up paying, but the premiums are going to rise considerably for you. If the renter had their own insurance, it mitigates the threat of a lawsuit or higher premiums.
When there is both a renter’s insurance and a homeowner’s insurance in place in the event of a disaster, you won’t be stuck with paying a large deductible which will provide some relief to the fraught situation.
Feeling Responsible Can Be Expensive
You might end up feeling responsible for a tenant if some disaster at the unit renders them homeless. Some states hold the landlord responsible and you would then have to provide relocation for the displaced tenants. You could be trying to deal with the damage of your property and at the same time be sorting out accommodation and other needs of your tenant. This would not be a concern if the the tenant had renter’s insurance.
Dogs and Basements
If your tenants have dogs, you can ask them to have insurance with $100,000 liability coverage in the event that the dog bites someone on your property. The tenant can also name you, the landlord as offering additional insurance. Your tenant might store their possessions in your basement and if there are leaks, sewer backups or water seepage it would be ideal if damage to their possessions were covered by their own insurance.
Ask Your Colorado Springs Investment Property Manager
A reputable Colorado Springs investment property management company can draw up this lease agreement to ensure that there is a stipulation that requires the tenant to obtain insurance and can name the landlord as the “additionally insured” party on the policy document. It adds an additional layer of protection for the landlord as well as for the tenant in the event of any unforeseen situation. Insisting on renter’s insurance from your tenants gives you ultimate peace of mind. You will never have to replace any of their possessions in the event of loss or damage. You will be saved from potentially high legal fees from any claims or lawsuits resulting from a tenant’s loss of possessions or injury occurring on your property. It will build a better relationship with your tenant when you know they are not potential liabilities but responsible people mitigating their own risk.