Do I have to require my renters to have renters insurance?!?!

November 15, 2012 1:23 PM

My independent insurance agent is insisting me that I require my renters to have renter's insurance in order for him to give me homeowner's insurance on a property I just bought.

My renters are poor --- they pay in cash, but they pay their rent on time. I'm certainly not going to throw them out of their home if they don't have renter's insurance. My insurance agent is saying that the tenant's lack of renter's insurance puts me in danger of being sued. I think that this is extremely unlikely, and that it would stupid to throw good paying tenants out of their house because they don't have renters insurance. Is it true that I will be paying more for property insurance due to my stubbornness?

posted by anonymous_account to work & money (26 answers total)

The insurance company doesn't know your renters, and doesn't know the risk they represent. The insurance company also doesn't know your ability to assess risk. So, basically, you're going to have to pay extra to cover the risk due to your stubbornness, yes.
posted by bfranklin at 1:26 PM on November 15, 2012 [4 favorites]

It is certainly true with your independent insurance agent, because they've told you that. If you want a definitive answer, call three more agents (independent and not) and see what they offer you rate-wise with and without proof of renter's insurance.
posted by davejay at 1:27 PM on November 15, 2012 [3 favorites]

Yup. Flat out, yup. What bfranklin said.

I'm not convinced that you're super-likely to be sued, mind you. And I'd be rather surprised if you lost any lawsuit simply because of this issue. But it's possible a more frivolous lawsuit could come if there is no insurance than if there is.

IANAL, IANYL, this is NOT legal advice.
posted by Lemurrhea at 1:29 PM on November 15, 2012 [1 favorite]

Apparently so.

One thing you can do is to pay the $130 yourself on behalf of your tenants. Renters insurance is dirt cheap.

Trust and believe that if their unit catches on fire, and all their shit gets burned up, that they'll sue you for it. Don't you obsessively watch People's Court like I do?

If someone breaks in and steals their electronics, you can be sued for not having good locks, or not fixing a window, or whathave you.

It's an incredibly excellent idea to require tenants to have Renter's Insurance. Everyone had peace of mind.
posted by Ruthless Bunny at 1:30 PM on November 15, 2012 [5 favorites]

Call more agents and get a few more opinions. Also, as someone who had had homeowner's and renter's insurance, renter's insurance can be cheap [I've paid between $7-12/month for it] so it might be worth it for you to just have them sign up for it and you pay the premiums as RB says.
posted by jessamyn at 1:31 PM on November 15, 2012 [2 favorites]

This is whack. How many renters actually have renter's insurance? I think your guy is fishing. seek another agent ASAP.
posted by Gungho at 1:42 PM on November 15, 2012

Depending on where you're located, yes, Renter's Insurance can be required.
That being said, renters insurance is really, really cheap. I pay less than $8 a month for $40,000 in coverage (and I think what I pay is on the high end.) It CYA and it covers theirs too.

Also, for the people saying "just pay it for them", I feel like there might be a legal issue with paying for insurance on someone else's belongings.
posted by Flamingo at 1:45 PM on November 15, 2012

I own a house that I rent out and I have never heard of this. I did have to get a different type of homeowner's policy (like a business policy) when I stopped living there and started renting out the house, and it was a little more expensive (like maybe $100 a year more, if that), but no, I wasn't told that my tenants needed renter's insurance, so this is definitely not a universal thing.
posted by rabbitrabbit at 1:45 PM on November 15, 2012

(I am in Oregon if it matters.)
posted by rabbitrabbit at 1:46 PM on November 15, 2012

You could ask them to get renters insurance, and give them a credit on their rent. It's usually pretty reasonably priced. They might be out $100 or so for a year, and you could deduct $100 from their rent next month.
posted by katypickle at 1:51 PM on November 15, 2012 [5 favorites]

In some states (like Oregon!) landlords are explicitly forbidden from requiring renter's insurance (though most landlords certainly encourage renters to have renter's insurance). Since I know landlords in Oregon can and do get homeowner's insurance, I doubt that this is an across-the-board requirement, and it probably varies a good deal by state.

Checking with other insurance agents is a good idea-- and you may also be able to get information from your local renter's rights advocacy group about what you can and can not require as a landlord.
posted by Kpele at 1:53 PM on November 15, 2012

Renter's insurance covers the renters' stuff. Your insurance covers your stuff (the building). You should also have some kind of umbrella liability policy.

What you should do is tell your renters this, and make them sign some kind of waiver. If that's legal in your area.

Also, them having insurance isn't going to stop you from being sued. If anything, it makes it more likely. They file a claim on their insurance, and then their insurance company sues you to see what they can get.
posted by gjc at 2:01 PM on November 15, 2012

I have rented all my life in both California and Indiana and none of my landlords ever required me to have renter's insurance. I think I was 30 before I even discovered such a thing existed.
posted by small_ruminant at 2:06 PM on November 15, 2012

Also, them having insurance isn't going to stop you from being sued. If anything, it makes it more likely.

Yes, exactly. So why would I spend $100 to make sure that they have renter's insurance?
posted by anonymous_account at 2:07 PM on November 15, 2012

My building started requiring renter's insurance two years ago. First time in 30+ years of renting that a landlord required it. When I inquired about why, I was told that the building's insurance was lower if they required renter's insurance. So, this may be a new thing. Also, It is not always that cheap. We are required to carry a minimum of 25K in coverage, and it cost us about $300 a year.
posted by hworth at 2:19 PM on November 15, 2012

Also, them having insurance isn't going to stop you from being sued. If anything, it makes it more likely.

Yes, exactly. So why would I spend $100 to make sure that they have renter's insurance?

It's more likely that any lawsuit filed would be reasonable. Because when calamity strikes and the tenants lose their stuff, they get money from the insurance. The insurance then decides if and for how much to sue you, rather than an emotionally distraught person who lost everything they own. If you wouldn't be liable (either it's the tenant's fault, or through other weird things), you will be sued only if they don't have insurance (because they have lost everything, are grasping at straws, and are not in an emotional place to calmly weigh the expected outcome). If you would be liable, or it's unclear if you would or won't be, you will be sued by somebody (their insurance) who has experience valuing claims, will likely negotiate with your own insurance company and settle the entire thing, saving you from court time and fees.

This is not to say you should pay theirs or require them to get it. But "being sued" isn't a binary issue, and from a lawsuit management perspective there are good reasons for landlords to like renter's insurance.
posted by Lemurrhea at 2:24 PM on November 15, 2012 [2 favorites]

No landlord has ever asked me for proof that I have renter's insurance (which I do). So that's a datapoint in favor of shopping around for somebody less demanding, if you want to just find someone who will insure you already.
posted by Holy Zarquon's Singing Fish at 2:29 PM on November 15, 2012

My landlord (in California) is now requiring new tenants to have this insurance, but this requirement has not been communicated to me, directly. Possibly, it cannot be required of existing tenants?
posted by Rash at 3:35 PM on November 15, 2012

Renter's insurance is incredibly cheap (I think ours is something like eleven dollars a month) and an incredibly good idea. Why not float the idea by your tenants? And then turn around and tell your guy you want cheaper rates. Heck, our car insurance is cheaper because we have it!!!
posted by St. Alia of the Bunnies at 5:32 PM on November 15, 2012 [1 favorite]

My lease requires that I have renter's insurance but no one has ever actually checked and I never got any. Are you sure your agent doesn't just want you to write the requirement into the lease?
posted by matildatakesovertheworld at 6:27 PM on November 15, 2012

Just so you know there really is no such thing as an true independent insurance broker. They are putatively independent but in reality they typically do all their insurance deals with one or two companies and every few years or so they shop their entire book around to other companies to see who will give the best deal for themselves (highest percentage) and their customers (lowest premium). Remember the broker gets a percentage so it is actually in their financial interest for you to pay more.

My insurance advice is to always avoid a broker if possible.
posted by srboisvert at 6:54 PM on November 15, 2012

They are putatively independent but in reality they typically do all their insurance deals with one or two companies and every few years or so they shop their entire book around to other companies to see who will give the best deal for themselves (highest percentage) and their customers (lowest premium).

This is not true. While there are independent agents who do this, it is wholly inaccurate to present this as being flatly true of all independent agents. My family owns an independent brokerage (surplus lines—they don't work with the general public), and they have relationships with over a dozen carriers, many of whom they've worked with for over twenty years.

Remember the broker gets a percentage so it is actually in their financial interest for you to pay more.

This is true of every single business in the world.

anonymous_account, there's an essential distinction that either your agent is not making or you're not passing along. Does your agent require this of you, or does he strongly recommend it? And if he requires it, is that his requirement, or is that the carrier's requirement? If the latter, you might ask if he has any markets that don't require this. And if he doesn't, then you might need to find a new agent, because that's a pretty unusual requirement.
posted by waldo at 8:21 PM on November 15, 2012

Renter's insurance is cheap. Just buy it for them.
posted by KokuRyu at 10:03 PM on November 15, 2012 [1 favorite]

I rent a house in Virginia and my lease says that it is the responsibility of the tenant to acquire renters insurance, but my homeowner insurance doesn't require me to prove that tenants are covered. I have an umbrella policy to cover against a variety of incidental things and this seems far more useful than the suggestion to pay for renters insurance on behalf of your tenants. I would seek other quotes because I can't help thinking that this requirement is a bit self serving and the agent is hoping to sell a policy to your tenants, but I could be wrong.
posted by dgran at 6:16 AM on November 16, 2012

Renters insurance exists primarily to insure against theft, flood and fire damage to tenants personal property. Do yours have any property that's worth insuring?

While I'm pretty darn sure that being sued will never be an issue for you, you can still cover that with a release of liability clause in your contract.

I would contact other agents and get different quotes. Your current guy seems to be trying to scare you into drumming up business for him.

For some background, I've was a property manager for a few years and moved on to manage my own rental property. The only time I've used rental insurance or suggested it to renters is when there is personal property involved that is very costly to replace if it CAN be replaced. Art, jewelry, cameras, musical equipment etc. are typical of what should be insured.

I hope I'm not responding too late for you to get this. Good luck and cheers to you for being concerned for the welfare of your tenants.
posted by snsranch at 5:45 PM on November 16, 2012

Renter's insurance also usually covers the hotel fees etc if a person gets burned or flooded out of their house.

As a side benefit, it often covers property stolen from your car, as well, if it's over the deductible.
posted by small_ruminant at 1:33 PM on November 18, 2012