Renters insurance policies are not only beneficial for the renter, but for the property investor as well. These policies are typically available with three types of coverage: personal property coverage, liability coverage, and coverage for additional living expenses. It isn't uncommon for renters to believe that the rental property owner in question cannot require renters insurance. However, it's entirely possible to work this into your lease, and we often advise property owners in our role as Charleston property management professionals to do just that.
A quick note: While this blog post is designed to give you some tips to safeguard your rental property, it is not intended as legal advice! When in doubt, work through such situations with Charleston Property Company.
What Is Renters Insurance?
You might hear renters insurance referred to as an HO-4 policy. When renters take out these policies, it provides liability coverage and covers their personal belongings. Just like with a homeowner's policy, renters insurance covers your residents if theft or fire occurs. However, these policies are affordable because they only offer coverage to the rental property contents and not the structure.
It isn't uncommon for renters to believe they have adequate coverage under the property investor who owns the property or through their Charleston property management company's insurance policy. However, this isn't the case.
An investor's insurance policy offers them the following coverages:
- Damages to property: If the rental property owner's rental property, or any other structure on their property, is lost or damaged, then their policy might offer coverage for replacement or repairs.
- Liability: If your renters or other individuals make claims against you as the property owner or against your property manager due to injuries, they have coverage.
- Personal property: If appliances or property maintenance items (like a lawnmower, for example) are on-site, these insurance policies could provide protection coverage.
- Rental income losses: If investors or property managers have renters who must move out due to their properties being deemed unlivable, they could receive income reimbursement.
Can Investors Make Renters Insurance Mandatory?
If you're an investor with a lease that currently does not include a renters insurance policy requirement, you cannot make it mandatory until it's time for renewal or extension. Investors should work with a trusted Charleston property management company to make renters insurance a requirement for new renters and those who are renewing or extending their leases.
Writing a letter outlining these requirements is standard practice for enforcing renters insurance as part of a lease. As soon as tenants sign the agreement, they acknowledge that they have received and agreed to this requirement. In the past, investors may have shied away from making renters insurance mandatory. The main reason is that they feared losing renters.
However, it's a good idea to include renters insurance in your lease for the following reasons:
- Because renters insurance covers property losses and damages, that coverage lessens the risk of your residents filing claims against you as an investor.
- If a disaster does befall your renters and they don't have coverage, they may have lost everything they own—and starting from scratch is a hard burden to carry when times are still tough.
Benefits of Requiring Your Residents to Get Renters Insurance
In South Carolina, it is not required by law for renters to have renters insurance. However, as a Charleston property management company, we recommend you include renters insurance as a mandatory element of the lease agreement because your insurance doesn't cover everything.
Here are several reasons why renters insurance is beneficial to you as the investor:
- Reduces the likelihood of conflicts: Renters insurance typically covers damages or the loss of a resident's personal property. If that renter doesn't have renters insurance, they may look to you to replace their lost property.
- Reductions in risks associated with pet damages: If it's allowable in the lease for pets to be on the premises, renters insurance could cover damages caused by those pets.
- Offers stress relief: When investors know their renters have coverage, they know that they can recover from damages or losses if disasters, robberies, or other unpleasant events occur.
How to Encourage Your Renters to Get on Board
When renters are trying to find a new place to live, they're dealing with a tremendous amount of stress. To make the move-in process easier, create a to-do list for your renters to complete before move-in day. That to-do list could include filling out a checklist about the condition of the property and giving renters more information about how to obtain renters insurance as a mandatory part of their lease. Making this information readily available helps relieve stress for new residents, and it also ensures that they won't forget to get a policy.
Investors can also encourage your residents to get renters insurance by offering incentives. For example, offer residents a gift card to a local business after they furnish proof of their policy. If there's a tenant renewing or extending their lease, offer them a small discount on their first month's rent after telling them about your new renters insurance requirement.
The last matter any investor in Charleston wants to deal with is having to cover the cost of losses that are covered by renters insurance! While many believe that a property owner's insurance policy offers these coverages, that isn't the case. When making renters insurance policies mandatory as part of leases, you and your renters both benefit. These benefits include having coverage for damages, losses, or costs for tenants who are displaced.
Requiring renters insurance is just one element of protecting your investment property. To tap into more of our insights as a Charleston property management company, it's time to download your free copy of Protecting Your Investment Property: A Guide! This will give you access to more ways to secure and safeguard your investment.