Carrying homeowners insurance on your primary residence typically covers the structure, the property’s contents, and liability. But having owner’s insurance on a rental property is slightly different.
An owner’s insurance policy on a rental property also covers structural damage and provides liability coverage but does not typically insure the property’s contents. After all, when you have tenants, it’s mostly their contents that are inside.
That’s why many, if not most, tenants should carry renters insurance, which covers a property’s contents and, sometimes, personal liability for the tenant. Rental insurance can provide peace of mind to both the tenants and the rental owner, which might lead you to ask: Can you require renters to carry rental insurance?
The Short Answer
The short answer is that, yes, you can require renters insurance. But the requirement must be clearly laid out in the signed lease agreement and must be required of every tenant. No laws say that tenants must have rental insurance, but also nothing prohibits rental owners or property managers from legally requiring it themselves.
If you’re managing the property yourself, the decision is yours. But some property management companies strongly encourage owners to require it. For example, if you have a rental property in Cupertino CA, a company that provides Cupertino property management might strongly advise you to require renters insurance.
Keep in mind that a professional property management company will likely provide a proven, ironclad lease with the appropriate language that clarifies this requirement. Not every lease template you download online will include such a provision.
But should you require it?
Again, some companies that provide property management in San Jose would strongly advise rental owners to require rental insurance. And there are plenty of reasons.
First and foremost, renters insurance protects both the tenant and the rental owner. It helps avoid the risk of conflict should some unforeseen circumstance occur. If, for example, your tenant’s personal property is stolen or damaged, rental insurance should cover their loss, perhaps stopping them from turning to you to replace their loss.
Along those same lines, shared liability is usually a good thing. If a tenant injures a guest on your property and doesn’t have a policy that includes liability, the injured party might go after someone who does carry liability insurance: you.
There’s also some peace of mind for the rental owner whose tenants have renters insurance simply because it can help them avoid hardship. If something were to happen and your tenant experiences an unexpected, uncovered expense, they might struggle to pay their rent. Some renters’ policies cover hotel stays should a tenant be temporarily displaced from the property, which could save the rental owner (or their insurance company) some expense.
Lastly, rental insurance isn’t very expensive, typically ranging from $15 to $30 per month, so requiring it of tenants isn’t likely to price you out of a competitive rental market. The potential benefits to both landlords and tenants are often well worth it.
How to execute the requirement
Again, it’s a matter of language in the lease. A lease is a legally binding contract whose provisions must be adhered to. You can ask a tenant to provide you with a copy of a rental insurance policy that proves coverage on or before their move-in date.
You are also well within your rights — and a reputable property management company will recommend it — to ask for proof of insurance each year the tenant occupies the property. It doesn’t do any good for you or your tenant if the policy required at move-in is allowed to lapse after one year.
Property Management Services from Valley Management Group
Valley Management Group has been providing property management services in San Jose and Santa Clara County for over 40 years and has many high reviews from both rental owners and tenants. If you own a rental property in Santa Clara County and are looking for property management services, contact Valley Management Group for a free property management quote and one free month of property management services.