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Tenant Insurance 101: What You Need to Know

for rent sign in front of a brick house

What is Tenant Insurance & Why do I Need it?

As a tenant, you may not give much thought to purchasing insurance for your rental property. After all, you don’t own the property. So isn’t your landlord or property management company responsible for all liability?

While tenant insurance is largely considered optional and acquired only at the renter’s discretion, it’s becoming more common for some landlords and property management companies to require the tenant to secure tenant insurance as a condition to their rental agreement.

Why is this? In truth, tenant insurance protects both the renter and the landlord. Let’s investigate how in more detail and tips on what to look for when purchasing a tenant insurance policy.

How Tenant Insurance Protects a Tenant

There are many reasons why, as a tenant, you should protect yourself and your belongings with tenant insurance.

Contents of Your Home

Tenant insurance protects your personal belongings, including furniture, clothing, jewelry, and other personal items.

Contents of Your Vehicle

Many people aren’t aware that tenant insurance also covers the contents of your vehicle, should the contents be stolen or damaged.

Living Expenses

Depending on the specifics of your policy, renter’s insurance can cover expenses like moving costs or hotel rooms if you cannot live in your rental property while repairs are being made after an insurance claim.

Liability Claims

If you or someone else is injured on the rental property or have damaged the property, tenant insurance may protect you financially.

How Tenant Insurance Protects a Landlord

There are several reasons why a landlord or property management company may require you to secure tenant insurance on your rental property:

It Mitigates the Threat of a Lawsuit

If a tenant doesn’t have tenant insurance and something happens to their property or there is an injury, they can often try to sue the landlord or property management company.

Avoids Relocation Costs

 If there is a fire, flood, or other damage that requires the tenant to temporarily relocate, the landlord or property management company may have to incur these costs. However, if the tenant has property insurance, their insurance policy may cover these expenses.

Damage Deductible

If a tenant damages the rental property, the landlord’s insurance will likely cover the repair costs, less the deductible. However, if the tenant has tenant insurance, many times it will cover the deductible, meaning there are no out of pocket costs for any party involved.

Peace of Mind

Many times, if you have a tenant that is willing to obtain tenant insurance, it means the tenant is responsible, non-litigious, and has pride of ownership. All great selling points when looking for a trustworthy tenant.

5 Tips on What to Look For in a Tenant Insurance Policy

So now that you know tenant insurance is a good idea, here are 5 tips to contemplate when considering a tenant insurance policy: 

tenants reviewing their renter's insurance policy

Choose the Right Coverage Amount: Take Inventory

A tenant insurance policy is meant to cover the replacement cost of your belongings in case of damage or theft at the rental property. The first thing to ask yourself is, “How much are my possessions worth?”. To answer this, create an inventory of your belongings that includes what you have and their value. It may be a good idea to keep receipts and take photos of your belongings. Adding up the total value of your belongings will tell you how much tenant insurance you’ll need to protect yourself financially.

Find Out What’s Not Covered: Read the Fine Print

Not all renter’s insurance policies are created equal. They vary in terms of coverage limits, deductible amounts, liability coverage, and exclusions. It’s important to read the fine print and discuss all details thoroughly with your insurer so you know exactly what’s involved. 

Understand the Types of Coverage: Actual Value v. Replacement Value

There are two basic types of tenant coverage: an actual cash value policy is based on the value of the damaged property, taking into account use and depreciation. A replacement value policy is based on what it would cost to buy the items again. Make sure you know the difference and which one is most beneficial to you.

Bundle Insurance Policies: Save Costs

Often, your insurer will allow you to bundle your renter’s insurance with the other insurance policies you hold, whether it be car or life insurance. These multi-plan discounts allow you to have all coverage under one policy and can save you money.

Choose a Deductible: Weigh the Pros & Cons

The deductible is the amount you pay for an insurance claim before the insurance company pays for the claim and the damages incurred. You have the choice of paying a  higher deductible, meaning the overall cost of your insurance policy will be less expensive.

However, a lower deductible will raise the cost of your overall policy. Many people choose a higher deductible with lower monthly payments and set aside the money you’ll need to meet that deductible if you have a claim. However, this is at your discretion and should be discussed with your insurance provider.