Owning a rental property opens you up to liability, and your job as a smart investor is to mitigate this liability where possible to protect yourself. One way that you can lower your risk of being the target of a lawsuit is by requiring tenants to carry renter's insurance.
Avoid the Financial Burden of Injury Claims
If your tenant fails to put salt down after it snows and their friend slips while walking up the stairs of your rental property, who would be to blame? While your tenant may share in the liability in this instance, the fact that you own the property means that you are likely to be named if a lawsuit is filed. Renter's insurance provides coverage for personal injury claims for the tenants, so you gain protection when you require renters to have insurance.
If someone is injured due to a maintenance issue, you could be facing full liability. Even if you were not aware that there was an issue that needed to be addressed, the fact that you own the property where the incident occurs makes you liable for any financial losses suffered by the injured party.
Replace Goods Damaged by Your Appliances Quickly
If you list appliances in the lease, you take on responsibility in case a tenant's personal belongings are damaged or destroyed while in the appliance. For example, tenants may be coming after you if their $300 grocery shopping purchases end up spoiled in a broken fridge. If a fire caused by your dryer destroys your tenant's business suit, you leave yourself open for a lawsuit. Renter's insurance covers your tenants' belongings in this case to take the financial burden off of your shoulders.
Reap the Benefits Without Any Cost
Requiring your tenants to carry renter's insurance will not cost you a dime, and these insurance policies tend to be very inexpensive for your tenants as well. Most policies run under $200 for an entire year, and some insurers even bundle renter's insurance with other policies to provide a discount. When discounts are factored in, it costs just over $100 for your tenants and you to be provided with protection in case the unexpected occurs in your rental property.
Make Sure Tenants' Valuables Are Protected
Beyond the benefits that protect you from a lawsuit, renter's insurance can protect your tenants in case their personal belongings are lost or stolen. If your tenants own valuables, these items will be covered under a renter's insurance policy. While you are not liable for lost or stolen items, renters whose valuables are stolen may be less able to make ends meet. In the end, you could lose out on rent money. Keeping this in mind when you draw up a lease helps you and your renters understand why renter's insurance is so important.
Becoming a property owner immediately opens you up to liability. Not only are you allowing someone else to live in your property, but you are also potentially allowing their friends and family members to step foot on your property. In order to mitigate the risk associated with owning a rental property, it is in your best interest to require tenants to carry renter's insurance for the protection of both you and your tenants.
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