By PM Jen
I sleep pretty well at night, and renters insurance is a big part of the reason why.
When you manage more than 600 homes, something bad is always about to happen somewhere. A pipe bursts, a storm rolls through, a kitchen catches fire. And when it does, I already know the owner's first question: "Does the tenant have renters insurance?"
I can answer that one right away. Yes, they do.
A couple of years ago, a six-unit building we manage caught fire. Nobody could live there for more than a year. When the owner called us, that was the very first thing out of her mouth. I can't tell you how relieved we were to say we knew for sure that every household in that building was insured.
That wasn't luck. It was a system.
Two policies, two jobs
A lot of tenants think the landlord's insurance covers them. It doesn't. Each policy has its own job.
The owner's policy covers:
- The building itself, like the roof, walls, floors, windows and trim
- The owner's liability for things the owner is responsible for
- Lost rent while the building can't be rented, on many policies (often called loss of income or loss of rents coverage)
The tenant's renters policy covers:
- The tenant's stuff, like furniture, electronics, clothes and dishes
- The tenant's liability for damage or injuries they cause
- Often, a place to stay if the home can't be lived in (ask your agent about "loss of use" coverage)
A storm. A bad storm damages the roof, and a tree branch breaks an apartment window. Wind and rain pour in. The owner's insurance pays to fix the roof, the window, the drywall, the carpet and the trim. It does not pay for the tenant's TV or leather couch. Those belong to the tenant, so the tenant's renters insurance covers them.
A kitchen fire. A tenant leaves a pan of oil on the stove and walks away. The fire burns the kitchen. This time the tenant caused the damage, and that's where the liability part of their renters policy comes in. It can help pay for the damage to the owner's property, and it keeps the tenant from getting stuck with a bill they could never pay.
Why owners should care
If you own the building, it's fair to ask why the tenant's insurance is your problem. Here's why:
- When the tenant causes the damage, their liability coverage pays for it instead of your policy. That means you aren't paying a deductible, and you aren't putting a claim on your record that can push your rates up.
- In a disaster, insured tenants land on their feet faster, and that makes the whole recovery smoother for everybody.
Requiring it is easy. Keeping people on it is not.
We require renters' insurance in every lease. That's the easy part. The hard part is making sure the tenant still has it every day they live there. Policies are easily canceled.
The old way looked like this:
- Collect proof of insurance at lease signing
- Get listed as "additional interest" on the policy, so the insurance company tells us about renewals and cancellations
- Watch for those notices, chase the policies that lapse, and follow up again and again
For years we put a ton of labor hours into that, and cancellation notices are still easy to miss. One email in a busy inbox, and a tenant could go months without coverage.
What we do now
We switched to a master tenant liability insurance program. It's something we can offer because of our size, and it usually isn't available to a landlord who manages on their own.
At lease signing, every tenant has two choices.
Option 1: Do nothing and get enrolled automatically. The tenant is placed on our master tenant liability policy for a small monthly fee, billed along with rent. Coverage starts the day the lease starts.
Option 2: Bring your own policy. The tenant buys their own renters' insurance and uploads proof. Once it's approved, the monthly fee comes off. To be approved, the policy needs:
- An A-rated insurance company
- At least $100,000 in property damage and personal liability coverage
- One Focus Property Management listed as additional interest
If that policy ever lapses or gets canceled, the tenant goes right back on Option 1. Nobody falls through the cracks.
Tenants, here's my honest advice
Please pick Option 2. I mean it.
Our master liability policy is there to protect the owner's property from damage you might cause. That's its only job. It does not cover your belongings, and it is not our suggestion that you stop there. If your couch, laptop and clothes matter to you, you need your own policy.
A good renters' policy today does a lot more than people expect. Depending on the company, it can include or let you add:
- Coverage for your belongings, at home and sometimes even away from home
- A place to stay if your home can't be lived in
- Identity theft protection
- Coverage for your cell phone
My tip is to call the company that has your car insurance. Most offer a discount when you bundle. For a couple of years I kept a renters' policy I didn't even need, because my car insurance plus the renters policy cost less than my car insurance alone. An agent can build coverage that fits your life. (I'm not an insurance agent, so ask them about the details.)
The bottom line
Tenants, renters' insurance protects your stuff and your bank account, and it costs a lot less than replacing everything you own. Owners, when something goes wrong, you'll want the answer to that first question before you even ask it.
If you own a rental in North Central Pennsylvania and you want a manager who already knows the answer, contact One Focus Property Management.
