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Insurance is designed to protect items of value against loss or damage and to protect policyholders from liability associated with the use or possession of that property. For rental property owners, therefore, the best landlord insurance provides coverage to protect against loss or damage to the rental property and from liability associated with what goes on there.
For tenants, renters insurance provides coverage for the personal items housed within the property and from liability for events that occur on the property, or for loss or damage caused by people or pets on the property. Thus, renters insurance differs from landlord insurance in terms of the scope and purpose of the protection provided.
When evaluating renters insurance and landlord insurance, it becomes clear that there are differences between solid, value-driven policies and those that don’t provide meaningful protection. That’s why we looked at some of the most important features of renters insurance and those of landlord insurance. This will allow you to better evaluate each so that you, and your tenants, can make better decisions about your coverage options.
How does renters insurance differ from landlord insurance?
There is no one-size-fits-all solution to insurance coverage. Insurance is based on customized values with specific limits and areas of focus. As a landlord or rental property owner, the focus of rental property coverage -- sometimes called landlord insurance -- is on the protection of the value inherent in the property itself. For renters, insurance coverage is designed to provide protection against liability and to protect personal property separate from the value of the dwelling.
Top Ten Things to remember when choosing the best landlord insurance
1. Landlord insurance may also be called rental property insurance.
Landlord insurance provides similar protection to homeowners insurance but is specifically designed with features that are specific to the needs of rental property owners. Among other things, landlord insurance can provide protection from loss of revenue associated with covered damage or destruction of property.
2. Landlord insurance may require an umbrella policy add-on
For high net worth individuals who own rental property, an umbrella policy may provide extra protection from costs associated with personal liability. Rental property owners may also explore options to protect their personal assets by establishing a corporate entity to hold title to the rental property portfolio.
3. There are a variety of types of landlord insurance
There are different levels of landlord insurance that provide various types of protection. More comprehensive landlord Insurance protects against a wider variety of potential dangers and accidents. It is a good idea to obtain coverage that is as thorough as possible without overinsuring the property.
4. Landlord insurance may cover some of the owner’s personal property
Rental property owners may keep some personal possessions on the property, including tools for lawn maintenance, appliances, and other necessary items. The best landlord insurance may cover these along with the property itself.
5. Landlord insurance may need to be supplemented by specialty coverage
For rental property that is located on a floodplain or in an area where earthquakes are a frequent occurrence, the landlord may need additional coverage to protect against these non-standard dangers. Property owners should consult with an insurance professional to find out what coverage is appropriate for the location of their property.
6. Landlord coverage may need to be adjusted when the property is vacant
Rental property coverage is generally priced based on the assumption that a tenant will be in place and providing daily oversight of the property. In the case of a long-term vacancy caused either by market downturns or the need for repair and renovation, coverage may need to be adjusted to account for the vacancy.
7. Landlord insurance costs may vary based on many different factors
Rental property insurance pricing is based on many different factors including the location of the property and the property’s specific features. In addition, the best landlord insurance can vary depending on the rental structure -- whether seasonal, short-term, or long-term tenancy.
8. Landlord insurance costs may be discounted in some circumstances
The installation of security and fire prevention equipment or bundling coverage of various types may result in discounted premiums. In addition, discounts may be available for customers who are members of certain groups or professional organizations.
9. Following optimal property management practices can help prevent damage and accidents
While it is important to have sufficient coverage for loss, damage, and liability associated with the rental property, it is just as important to provide proper care and oversight of the property in order to avoid damage, loss, and accidents from happening. Prompt repair and upkeep when needed is the best way of stopping problems before they occur.
10. Landlords should properly structure the lease to avoid personal liability
It is important to obtain legal advice when putting together a lease agreement. The lease should set out limitations on personal liability in order to protect the property owner and his or her finances. Consult with an attorney on a regular basis to ensure that lease agreements are kept up-to-date and reflect the most relevant legal protections.
Top Ten Things to remember when choosing the best renters insurance
1. Renters insurance can be cash value or replacement value coverage
Cash value coverage provides compensation for the current, depreciated value of the covered item while replacement value provides compensation that is adequate to replace the item at current market value. For example, a five-year-old television that was purchased for $1000 (and which currently costs $1200) might only be worth $200 today. Cash value coverage would compensate at that lower value, while replacement coverage would provide the compensation needed to purchase a new, comparable television at today’s market value.
2. Renters insurance can be required in many states
Most states, including California, allow landlords to require renters insurance and to specify the amount of coverage required. Some states even allow landlords to purchase a renters insurance policy on behalf of the tenant and charge a fee to cover the monthly premium.
3. Renters insurance provides protection for more than possessions
Besides protecting personal property from damage or loss, renters insurance also provides liability coverage in the event of an accident on the rental property or in the event of damage caused by the renter or their pet.
4. Renters insurance should be adjusted for unusual or expensive items
Renters should check the limitations of their coverage and purchase additional coverage for expensive furnishings, jewelry, or artwork. In addition, renters should conduct a thorough inventory of their personal property and record pertinent information with photos or video.
5. Renters insurance offers protection to both tenants and property owners
While renters insurance offers protection from loss, damage, and liability to tenants, it also helps to protect property owners by providing compensation to offset insurance deductibles and offering the first line of defense from liability claims. In addition, by helping to protect tenants from financial reversals caused by excessive loss, renters insurance ensures that tenants will be able to continue to pay rent in the event of accident or damage.
6. Renters insurance offers some pet-related protection
While pet insurance covers the healthcare needs associated with pet ownership, renters insurance can provide protection from liability in the event that a tenant's pet injures someone or damages their property.
7. Renters insurance policies should be separate for roommates
Even if they are related or are in a close personal relationship, adults living together should have their own separate renters insurance policies. This helps to provide protection for individually owned items and personal liability. In addition, it simplifies the process of ensuring protection in the event that one of the tenants moves to another property.
8. Renters insurance offers various levels of coverage
There are a variety of renters insurance policies with different levels of protection. Tenants should compare policy specifics in order to find the level of coverage that is best suited for their specific needs.
9. Renters insurance rules can vary in different states
Different states have different rules and requirements regarding renters insurance. Renters should familiarize themselves with the regulations in their particular state and check the lease for specific requirements regarding renters insurance.
10. Renters insurance is remarkably affordable
In most cases, renters insurance offers exceptionally affordable protection. Costs can vary by location and by the specific policy features and limitations, but for the most part a policy that offers comprehensive protection is exceptionally cost-effective.
Facilitating effective communication with tenants
To tenants, requirements like mandatory renters insurance can seem arbitrary and even capricious. However, you can create more consistent buy-in to your renters insurance policy through effective communication designed to convey the positive aspects of renters insurance coverage.
Here are some ways to make your communication more meaningful and more welcome:
- Provide a variety of ways for tenants to communicate and to obtain information. A rental portal with messaging options, dedicated email address, website, and social media platforms are all places where you can provide meaningful information and answer questions.
- Put together a library of frequently asked questions and current information for onboarding new tenants and facilitating tenant communication. Consider providing both written communications like blog posts and verbal communication through video content to ensure optimal engagement.
- Be honest and aboveboard, providing information that is true and clearly communicated. Don’t try to hide your requirements or rules in order to catch someone in non-compliance. Be open about what you require of tenants and explain your reasoning if asked. Emphasize the win-win aspects of the rules you make -- like the renters insurance requirement, for example -- so that tenants feel like stakeholders in the process.
Shopping for renters insurance
When shopping for renters insurance, your tenants will need to look for coverage that is affordable and comprehensive, providing appropriate levels of protection for each member of the household. This can be a challenge, requiring research and comparison in order to find the right level of coverage.
If you are a property manager or leasing agent, you may decide to require renters insurance in order to help your tenants better protect themselves. If so, it is a great idea to provide ways for your renters to find the right coverage and the most reliable carriers.
For the rental property owners you work with, it’s important to ensure that they are aware of their coverage options and that they are carrying an appropriate level of coverage for the property and its location. In addition, let them know how requiring renters insurance can help to protect their interests as well.
By partnering with Sure, RentSpree provides consumer-friendly and landlord-friendly coverage that works for everyone involved. As a property manager, you are able to notify your renters of their insurance obligation and help them obtain the coverage they need, all from the RentSpree platform. Track the status of your tenant’s renters insurance policy directly from the RentSpree dashboard, ensuring that they are always in compliance with the terms of their lease agreement.
With a policy from Sure, renters will enjoy the peace of mind that comes with protection of their personal property as well as coverage for personal liability, sewer or drain backups, loss of use, replacement cost, and identity fraud. By providing better protection for tenants, RentSpree and Sure protect you and the property owners, since tenants will be less likely to experience financial setbacks after a covered loss or liability.