A stipulation that the tenant maintains renters insurance
A better-protected renter is better for housing providers.
In an ongoing series, we invite rental housing providers to take a careful look at their current lease agreements and stress some important clauses we’d like to see included, beginning with the requirement that the tenant maintain renters insurance.
These types of policies provide added layers of protection for landlords and tenants alike with a negligible investment on the part of the tenant; it averages around $12 per month and when the tenant bundles a renters insurance in with car insurance, he or she may realize a discount.
While policies can cover as low as $100K, the building is likely worth more than that, so the Personal Liability we’d like to see is at least $300K combined single limit per occurrence for Bodily Injury and Property Damage, and this can be a godsend to owners when life happens.
To use a real-life example, a tenant plugged in a charger to power up their iPad, the charger burst, and it caused $100K of damage to the unit. With the tenant armed with a renters insurance policy, the landlord put a claim against the tenant’s policy. By turning to this, the landlord was able to keep his premium lower, avoided costly legal fees, and saved an enormous amount of time by having the tenant assume this risk.
The challenge is convincing the tenant to obtain renters insurance and keep paying the premiums.
On unit turnover, the answer is easy. Have the new tenant sign an updated lease agreement prepared by Bornstein Law that requires this. Proof of renters insurance should be furnished before the keys are handed over. The lease can state that upon the owner’s request, the tenant provides annual or periodic proof that they are maintaining the policy.
Finally, the lease should state in no uncertain terms that the failure to maintain a renters insurance policy will be considered a material breach of the agreement and constitute a just cause reason for eviction.
As for those tenants midstream in the tenancy who have had no such requirement to get and maintain renters insurance (this was not required in the original lease they signed), the landlord can conceivably change the terms of the tenancy depending on the jurisdiction. Consult our office first.
However, our strong preference is education and selling the benefits of renters insurance, and not making it some sort of added requirement for the tenant to comply with.
When there is damage or theft, policyholders can get “brand new stuff,” but there’s also peace of mind knowing that temporary living expenses are covered if the tenant is displaced. There are, in fact, a host of perks that come with renters insurance you can glean here.
There’s nothing prohibiting housing providers from sending educational materials about the value of these policies every so often.
Getting renters insurance, however, has been a bit challenging.
California’s insurance industry is in a state of tumult with companies leaving the Golden State in droves and talks of reform are underway after carriers have lost billions of dollars because of Mother Nature. It gets worse.
According to Jude Winterhalter, the founder of Jackson Square Insurance Associates, many carriers have stopped writing renters insurance policies because there’s little money to be made. He says that tenants should take to the Internet to find someone to write a policy.
Think of a little green lizard.