Property landlords should take a dual approach to protecting their rental property and their business model: Maintain landlord’s insurance and require renters insurance.
The first element, of course, is insurance on the property. It’s not an option, banks require it. If there’s a dispute between you and your tenant, lawyers will likely go after you, the landlord … the “deep pocket.” For that reason, you should maintain as much liability coverage as your carrier allows – typically $500,000 but in some policies, you can go as high as $1 million.
To mitigate this exposure, though, and protect your financial interests as a landlord, you can require that your renters obtain Renters Insurance. Renters insurance not only covers the value of the renter’s belongings in case of damage to the dwelling, but it can cover their expenses if they’re required to move out during home repairs. The liability coverage in a tenant Renters policy also extends to the damage the tenant causes to the dwelling. It won’t cover normal wear and tear, but it will cover damage from their negligence – fire or water damage that they’ve caused, for example.
Your lease agreements should require the tenant to carry $500,000 in Renters Insurance coverage. The policies are not expensive, typically around $20 per month, and quite often if the tenant goes to the company that insures their car they can get a discount below that. It’s also advisable that the tenant name you as an Additional Insured on their policy for liability coverage. In this way, you’ll be able to confirm that the policy is in place and you’ll be notified when it’s canceled or renewed. Additionally, this arrangement will give you the ability to file a claim on the policy if necessary.