Renters insurance can provide plenty of benefits for the tenant, from protecting personal belongings from fire, theft, and more to serving as a source of liability insurance if a guest gets hurt inside the rented house or apartment and more.
But can a landlord require renters insurance? The short answer is yes. This post explores the nuances, including why a landlord might want to make it mandatory.
Can a Landlord Require Renters Insurance in All States?
In most states, the answer is yes, they can (Oklahoma may currently be an exception). Plus, if they do, they can usually determine a minimum policy amount that their renters must carry. If they do require a minimum policy amount, the landlord will likely be more concerned about the amount of the liability coverage a tenant has because that can have a financial impact on the landlord if, say, damage from a fire or an overflowing bathtub occurs. They may be less concerned about the amount of personal property coverage that a tenant has in their renters insurance policy.
While landlords may require tenants to have renters insurance, there are no states that require renters insurance (although this could change, so check your state’s laws). The current situation is that nearly all of them give this authority to landlords, should they choose to exercise that right.
To get a good understanding of what a particular landlord requires and to be clear about whether renters insurance is required for the apartment you want to lease—read the lease language carefully. It may contain a clause, for example, that requires a new tenant to provide proof of renters insurance to the landlord within a certain period of time, perhaps two weeks from the lease’s start date. If more clarity is needed, ask the landlord for an explanation before signing the lease.
Reasons Why Landlords Require Renters Insurance
First, this can be part of a landlord’s tenant screening process, just like checking a renter’s credit scores may be. If, for example, a potential tenant says they can’t afford a renters insurance policy, this may be a red flag that they won’t consistently be able to pay the rent, either. Plus, the fact that a tenant is willing to buy and maintain a policy could be a sign that they will take responsibility for their rented space and belongings.
Plus, having tenants who maintain renters insurance, could lower a landlord’s overall liability. If, for example, a tenant doesn’t have an insurance policy and some of their belongings are stolen, that tenant may decide to sue the landlord to get the money to replace those items. The same basic scenario could play out if they (and/or others) were injured inside of the tenant’s apartment. Without the liability coverage contained within a renters insurance policy, the tenant or guests may decide to take the landlord to court to cover medical expenses.
It’s also possible that, if someone gets injured in a rented space and doesn’t have renters insurance, the hospital caring for the injured party might sue the landlord. Even if the landlord’s policy covers the hospital bill, this could result in higher insurance premiums for the landlord.
Here’s a related possibility. Let’s say there’s a fire in an apartment complex and, because of smoke damage, tenants need to temporarily find other places to live while the problem is being addressed.
Tenants without renters insurance may not be able to pay for temporary lodgings and may attempt to get those funds from the landlord. In some states, the landlord may in fact need to provide relocation benefits for tenants who don’t have their own coverage. So, requiring a policy can shift part of the financial burden from the landlord to the affected tenants.
Continuing with the fire scenario, let’s say it’s one that was accidentally set by a tenant and it damaged several parts of the building. Let’s also say that the landlord’s insurance policy will cover the costs, minus the deductible on the landlord’s policy. That can help to cover cleanup and remodeling expenses but the deductible can be significant—and the tenant’s renters insurance may cover the dollar amount of that deductible. This reduces the landlord’s out-of-pocket expenses, which can be a real plus for that landlord.
Recommended: What Does Renters Insurance Typically Cover?
Proof of Insurance
If a landlord requires a policy, proof of existence may be required. Perhaps they’ll want to see a statement from an insurance company or a copy of the policy itself. Other times, they’ll simply take a tenant’s word on the subject. Sometimes, a landlord will want to be listed on the policy as an “additional interest.” When that takes place, the landlord will be notified if the policy coverage lapses because of non-payment or because the tenant cancels the policy.
Naming someone as an “additional interest” is different from naming them as an “additional insured.” The second term refers to people who are also covered by a tenant’s policy, perhaps a roommate or partner.
Actually, landlords can’t be named as someone who is additionally insured and that would be counterproductive, anyhow, because that would stop the landlord from being able to file a liability claim on that policy.
Recommended: Which Insurance Types Do You Really Need?
Securing a Policy
When deciding what to buy, it’s important to factor in the value of personal belongings that need to be covered and what is affordable. Different insurance companies offer different coverages at differing price ranges; so after determining the value of personal belongings and budgetary constraints, it may be time to compare policies.
The National Association of Insurance Commissioners (NAIC) says the average renters insurance policy costs between $15 to $30 monthly. Compare that to what it would cost to replace personal belongings, NAIC notes, and it would typically be much more than what is paid out in renters insurance premiums—and that’s not even factoring in the benefits of having liability coverage and additional living cost coverage (such as temporary lodging if needing to leave the rented space).
Actual Cash Value Versus Replacement Costs
Some policies pay out the actual cash value of lost or damaged belongings, while others cover the full costs of replacing what was lost or damaged. Let’s say that a three-year-old laptop was stolen from a tenant’s apartment.
If that person’s policy uses cash value when reimbursing the tenant, the amount would be what the laptop originally cost minus any depreciation that took place over that three-year period. If the policy is a replacement cost one, then the tenant would be reimbursed what it would cost to get a similar laptop today.
Review the policy’s deductible. This is the amount that the policyholder is responsible for before insurance coverage applies. Typical deductibles fall around $500 or $1,000, although they may be higher. Some policies may offer deductibles that are a percentage of the policy’s coverage amount.
Landlords do have the opportunity to require tenants to have renters insurance. Double-check the lease agreement and confirm with the landlord before signing a lease. Renters insurance can provide peace of mind to tenants in the event their property is stolen or damaged. Coverage and cost may vary depending on the plan type.
SoFi has partnered with Lemonade to offer renters insurance that’s affordable and easy to apply for and understand, with instant quotes available. Tenants can protect their belongings at a low premium, with prices starting just $5 per month.
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Photo credit: iStock/staticnak1983
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