Renters insurance is a type of policy your tenants purchase that covers their personal property and belongings in case of unfortunate events such as natural disasters, theft and fires. This insurance will also cover the cost of temporary living arrangements if a tenant's home becomes inhabitable after an incident.
Depending on the policy and the location of the property, your tenants may be able to choose from other add-on coverages. For example, tenants in California can opt to add earthquake coverage to their rental insurance properties, as not all plans include it.
Landlords and tenants should be familiar with what renters insurance will cover. While the exact coverage will depend on the specific policy, most standard plans will include the following four types of coverage.
1. Personal Property
The first thing renters insurance will cover is your tenants' property, including belongings and vehicles that get lost or damaged on the property due to perils such as:
Your tenants will choose the amount of coverage they need based on how much they think their belongings are worth — the more coverage they purchase, the higher their monthly premium will be. Standard renters insurance policies will cover your tenants' belongings, such as:
The policy will also typically cover high-value property, such as jewelry, for an extra fee.
2. Liability
Your tenants probably don't anticipate an accident to occur at their home, but anything can happen. The liability coverage in their renters insurance policy will cover them and you in case of the following.
3. Temporary Living Expenses
If a fire or other disastrous event leaves your property inhabitable for a certain period, your tenants' renters insurance will cover their temporary living expenses. They will typically assist in finding a place for your tenants to stay, as well. This coverage lifts the burden of providing tenants with temporary housing off landlords' and property managers' shoulders.
4. Add-Ons and Other Extra Coverage
While renters insurance policies will cover almost all of your tenants' personal belongings and liability, there are a few exceptions. Your tenants may want to consider adding the following types of extra coverage if they apply.
Be sure your tenants are clear on what their renters insurance policies will and will not cover. For example, a few common situations and items renters insurance will not cover include:
Some landlords may be wary about requiring renters insurance for their properties due to the assumption that it will scare away potential tenants. While this may be true, you may also want to ask yourself — do you want a tenant who can't afford another small monthly payment to ensure the safety of their belongings?
The only reason not to require renters insurance is if the laws in your state prohibit you from doing so. In the United States, this is only the case in Oklahoma, where landlords cannot require their tenants to purchase a policy. However, this does not mean you cannot strongly encourage them to do so, and answer the question, "Is renters insurance worth it?" in their rental agreement.
Even if you don't live in Oklahoma, though, be sure to research the laws on renters insurance in your state. While all other states do allow landlords to require renters insurance of some form, there may be additional stipulations or specifications to follow.
As with any insurance policy, the costs will vary based on the types and amount of coverages your tenants choose, as well as their deductibles and credit history. Rates will also vary depending on the location of your property, the type of property and whether or not your tenants have pets. However, the average range of most rental insurance policies with all these factors considered is between $15 and $30 per month.
Annually, the average cost of renters insurance in the U.S. is $187, depending on which state you live in. For example, an average tenant in South Dakota pays around $118 a year, compared to the $244 price tag Mississippi residents would pay for the same coverage.
Depending on where your tenants choose to purchase their renters insurance policy, they may be able to get a lower monthly rate by bundling their plan with their auto insurance policy. They could also have the option to save by paying for a full year of coverage up front, rather than month to month. Encourage your tenants to do their research and choose the company that gives them the best coverage for their needs at the most affordable price.
The amount of coverage your tenants should purchase will depend on a few factors, such as the value of their belongings, the type of dwelling and how much they're willing to pay per month for their insurance policy. The higher the amount of coverage, the higher their premiums will be. Similarly, the lower their deductibles are, the higher their premiums will be.
In general, your tenants will be able to choose their coverage amounts for the following.
Like with any other insurance policy, your tenants will also be able to choose their deductibles for each coverage type, which is the money they must pay out of pocket when they make a claim. This rate will, in turn, affect their premiums. For example, a plan with a $500 deductible for personal property claims will have a higher monthly premium than a plan with the same amount of coverage but a $1,000 deductible. So, if your tenants would prefer to save money on their premium now, rather than later, when they must make a claim, they should pick a plan with a higher deductible — and vice versa.
Several benefits of renters insurance exist for tenants — such as having protection for your belongings and liability coverage in case of any damages or injuries that occur in your home — landlords will also enjoy many advantages to requiring renters insurance for their properties. Some of these benefits include the following.
Landlords in Pennsylvania can legally require their tenants to purchase some form of renters insurance. Rather than leaving your tenants wondering, "Do I need renters insurance?" consider requiring them to do so — and be prepared to explain that it's for their benefit, as well as yours.
Do you need a reliable property management company in Harrisburg, PA? Harrisburg Property Management Group is the partner you have been looking for. Our team and our legal counsel can assist you with adding a renters insurance requirement to your lease. Read more about our property management services, or contact us today to speak with a team member.
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