Do Your Tenants Have Renters Insurance? – You Could Be Left Holding the Bag

Purchasing and renovating a property for renting out is a great way to save for your future or retirement. But as easy as all those TV programs make it sound, you still need to assemble a good team to protect your investment and having good landord insurance is the first step.

If you are getting a mortgage on the property, then the bank will want to see full coverages, but as a landlord you only insure for the building and anything you own, such as sheds, outbuilding and appliances and not the contents. Your tenants should carry their own renters insurance for their contents.

Renters Content Insurance – Something My Tenants Wished They Had That Fateful Day

But one thing to keep in mind when signing up a tenant is that you get proof of them having renters insurance. Many landlords and property owners don’t push this because they figure “hey my building is covered, your stuff is your problem” Well here is where it can get sticky!

I own a rental property and I made sure I had coverages and had a proper lease between the tenants and I. In the lease it was suggested they get renters insurance because I would not be covering their contents. They said they would. I never pushed the issue, and then 10 weeks later, due to arson (not my tenants fault) a shed at the side of the house burst into flames and spread to the house. I had 90,000 dollars worth of fire and smoke damage.

The tenants were away for the day and when they got back they saw the fire department there. I was then called. In the daylight I met up with my insurance adjuster and the town inspector, and that is when I found out my tenants did not have renters insurance. There furniture was not burnt but had smoke damage. It was not high end furniture but there was a lot of it.

You as the Homeowner are Responsible for Removing Their Things

If your tenant doesn’t have insurance then it is your responsibility as the homeowner to remove the tenants effects. If your tenants simply walk away from it, you are left holding the bag. Your policy doesn’t cover removing their stuff, and to repair the house the builders want the house empty. So you could be forced to pay for something to come in to a toxic smelling building and remove all the furniture to the dump and pay dump fees

.. This can cost you a lot of money and agravation.

If the tenants had renters insurance (which is very cheap in price) they could have had all their effects removed and cleaned and replaced if needed and could have been sitting in a hotel until the repairs were finished. But instead they simply had to camp at relatives and get rid of much of the furniture. They are back in now, and they got the right insurance and it costs them 10 dollars a month. Too bad I didn’t push the issue, because now I was responsible for emptying the house.

Also see: Tenant Screening and buying rental property to help you make informed decisions on property investing.