As a Columbia property management company, we work hard to protect our clients from liability claims and risk that can so often impact rental property owners in our area. For that reason, we think it's important to consider including renters insurance as a crucial component of your lease agreement for Columbia rental homes.
Most property owners will find it is necessary to require renters insurance to ensure long-term success. However, if you're a fairly recent investor who just happens to be getting started, you may wonder why renters insurance is considered a smart element of healthy portfolio growth.
Renters insurance protects the people renting your property, but there are several key reasons you should require it as the property owner that make it beneficial for you, too!
Keep in mind that this information is not legal counsel. We highly encourage you to work with an experienced attorney if you’re not handling the leasing process via full-service property management.
Is It Legal to Make Renters Insurance a Requirement?
- In Columbia, it is legal to require renters insurance as long as you require all of your renters to carry a policy by making it a component of your lease. You cannot make just one renter pay for it if others do not.
- The Maryland Insurance Administration even highly recommends that renters purchase a policy on their behalf, even if it is not required by a lease.
- It's always wise to discuss your situation and needs with your Columbia property management partner or a real estate attorney if you’re unsure of renters insurance stipulations.
Know the Value of Requiring Renters Insurance
Why do it? Requiring renters insurance may seem like a big component of any real estate agreement. You may be worried your renters will no longer be interested. However, some outstanding benefits come with having it.
First, consider what renters insurance is and how it works.
- The renter of the property purchases this type of insurance.
- It covers the valuables the renter has—such as furniture, computers, and personal items.
- It covers the renter in a range of situations, including fires and theft.
It also provides a level of liability insurance to protect the renter from claims made against them. For example, if they invite a neighbor into their home, and that neighbor trips and hits his or her head, they may face costly medical bills without renters insurance.
Next, consider the property owner's key benefit: it does not cost you anything to require this type of coverage.
- A Columbia rental property owner does not pay for this insurance policy. More so, most renters insurance policies are very affordable.
- Estimates for Maryland are about $16 per month for coverage with various options to choose from in terms of companies, coverages, and policy types. Some policies are as low as $10 a month.
Considering this, renters insurance is rather accessible to most people.
Renters Insurance Protects Both Parties
There are additional benefits to consider regarding renters insurance. For the renter, the benefits include:
- Covering some valuables used every day such as laptops, even outside the home
- Protecting his or her property from loss during a fire
- Protection for expensive valuables based on policy terms
- Low cost for ample protection
- Minimized liability risks.
As a property owner, you likely have insurance on your Columbia rental home yourself. This type of insurance covers the structure and the common areas—which as the owner, you are responsible for should someone fall or suffer a loss. How does a renters insurance policy benefit you, then?
- A policy protects your renters: Should a fire break out, causing your renter to lose thousands of dollars in belongings, it’s heartbreaking. Though not your responsibility as a property owner, it’s difficult to manage these types of situations.
- Insurance protects your reputation: Even though many people recognize that it is not the property owner's responsibility to cover the losses in such events, it’s still worrisome when the community learns a renter lost all of his or her belongings. Requiring insurance protection minimizes the risk of the blame being turned toward you.
- Reducing relocation costs: Some policies offer relocation expense coverage, which may help to provide renters with housing. There is also protection from lawsuits filed for lack of security or safety. For example, if someone entered the renter's home, that renter may try to pursue a lawsuit stating the property was not kept safe. That risk is reduced if there’s insurance coverage in place.
- May assist with pet damages: Renters insurance coverage may also help cover the damage caused by pets in the property depending on the policy, minimizing what property owners have to pay beyond the deposit.
How to Make Renters Insurance a Requirement
- Given the value that a renters insurance policy offers, it’s worth requiring your renters to have this policy in place.
- It is one of the steps you can take to protect your portfolio's value, especially when you apply this requirement across the board.
- It is important to ensure the requirements for renters insurance are in the leasing agreement.
- Be sure that the leasing agreement meets all city and state laws to ensure it is legally binding.
At Renters Warehouse BW Metro, we can help. Our Rent Estate™ Advisors can guide you in the formation of your lease to ensure this type of contract requirement is in place. Get to know the benefit of Columbia property management services when you download your free copy of our guide to real estate investing!