Why do so few renters have insurance? One explanation is that many people incorrectly assume they are covered by their landlord's policy. Another reason is that people underestimate the value of their belongings. If the average renter were to add up the value of just clothing and electronics, it probably wouldn't take long to get into the thousands of dollars. One more often overlooked reason is liability: If someone is injured at a rental property – a friend, neighbor, or the pizza delivery person – they could sue.
Your insurance as a landlord covers the structure itself and the grounds, but not your tenant's belongings. A growing number of landlords are now requiring tenants to purchase their own renter's insurance policies, and they'll expect to see proof. This could be the landlord's idea, or it could be an "order" from the landlord's insurance company – the idea being that if the tenants are covered themselves, some responsibility can be shifted away from the landlord. If you’re looking for a persuasive argument for tenants to purchase renter’s insurance, share these:
3 Reasons to Purchase Renters’ Insurance
1. It's affordable.
The average renter's insurance policy costs $187 a year, according to 2011 figures reported by the National Association of Insurance Commissioners (NAIC) in 2013. Your actual cost will depend on factors, including how much coverage you need, the type of coverage you choose, the amount of your deductible and where you live. If you're in Mississippi, for example, you'll pay the most (average $252 a year); if you live in North or South Dakota, you'll pay the least (average $117 a year).
2. It covers losses to personal property.
A renter’s insurance policy protects against losses to your personal property, including clothes, jewelry, luggage, computers, furniture, and electronics. Even if you don't own much, it can quickly add up to a lot more than you realize – and a lot more than you'd want to pay to replace everything. According to esurance.com, the average renter owns about $20,000 worth of personal property.
Renter's policies protect against a surprisingly long list of perils. A standard HO-4 policy designed for renters, for example, covers losses to personal property from perils including:
- Damage caused by aircraft
- Damage caused by vehicles
- Falling Objects
- Fire or lightning
- Riot or Civil Commotion
- Vandalism or Malicious Mischief
- Volcanic Eruption
- Weight of Ice, Snow or Sleet
- Windstorm or Hail
- Damage from water or steam from sources including household appliances, plumbing, heating, air conditioning or fire-protective sprinkler systems.
Note: Losses resulting from floods and earthquakes are not covered in standard policies. A separate policy or rider is required for these perils. In addition, a separate rider might be needed to cover wind damage in areas prone to hurricanes. And renter’s insurance policies don't cover losses caused by your own negligence or intentional acts. For example, if you fall asleep with a lit cigarette and cause a fire, the policy most likely will not cover the damage.
3. It provides liability coverage.
Liability coverage is also included in standard renter’s insurance policies. This provides protection if someone is injured while in your home or if you (or another covered person) accidently injure someone. It pays any court judgments as well as legal expenses, up to the policy limit.
Talk to your tenants about the benefits of renters' insurance. They may not know how little it takes to cover their most valued possessions.