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Should my tenants have renters insurance?

This post is sponsored by Duuo

Adding a small addendum to your lease agreements, mandating coverage for renters, is a shrewd move to benefit all parties. Whether you’re a new landlord or longtime one, it’s smart to require your tenants to have renters insurance.

It’s so valuable that one insurance provider, Duuo, is partnering with property managers to offer tenants insurance at scale.

Here’s how this simple clause can save you from headaches, stress and worry. 

How renters insurance protects your investment

As a property owner, you don’t need insurance by law, but you get it to protect your building, contents and even yourself from potential risks. A typical home insurance policy covers the building and accessory dwellings, third-party liability, personal property, and additional living expenses. Renters insurance, as is often noted, covers the renters personal belongings, otherwise known as contents insurance. But, there’s much more to it, including: 

Third-party property damage

If your renter has a visitor whose property is damaged, the renter’s policy can pay for the repair or replacement. Therefore, the visitor has no reason to pursue you for damages costing you time and money. 

Third-party liability coverage

Let’s say the guest injures themselves in your tenant’s suite. Their renters insurance can pay for the ambulance and other medical costs outside of a provincial health plan (e.g. physiotherapy, dental). Similar to the property damage, renters liability coverage ensures you’re not on the hook for any liable compensation. 

Additional living expenses

If your renter can’t stay in their apartment due to extreme damage from something like a flood or fire, their renters insurance is designed to cover the costs of alternative living expenses while you have their unit repaired.

How landlord’s benefit from tenants insurance

  1. It can pay your deductible. If your tenants are responsible for any damage to your building, while you’ll use your insurance to pay for the repairs, their insurance can pay your deductible. This can save you hundreds, or even thousands.
  2. Keep your tenants protected!. Feel good by educating tenants (especially those moving out on their own for the first time) about protecting the myriad of gadgets they possess – from smartphones to TVs and laptops. They’ll be happy to have the coverage in place if anything happens, even if something is stolen while they’re travelling. 
  3. Avoid the courts. We outline this above, but it’s worth repeating. If a renter has access to funds through insurance benefits, there’s no incentive for them to go after you. Accidents happen, and insurance can quickly solve disputes. 
  4. Get cheaper landlord insurance. By requiring renters insurance, you can often get a discount because there’s inherently less risk for your insurance company. 
  5. It’s affordable peace of mind. In fact, Duuo tenants insurance policies cost between $12 and $20. So, if the potential renter pushes back, it may serve as a red flag they have credit issues or lack financial stability. You don’t have to rent to them if they don’t abide by your lease and avoid potential disaster. 

Knowledge is power

Even though you, as the owner/landlord, don’t need a tenants insurance policy, understanding what is and isn’t covered will allow you to better prepare for any future risks.

What’s not covered in a tenant’s policy

Earthquakes or floods from a sewer backup or snowmelt seeping into the basement isn’t covered, unless you add the coverage to your policy (or your tenants add it to theirs). 

Illegal activity isn’t covered, so be sure to also stipulate zero tolerance in your lease. 

Limits and exclusions

It’s worth mentioning that there are limits to their contents coverage on certain items. So, if they own expensive jewellery or ride top end road bikes, let them know they should speak to their insurance broker about upping their limits.  

If a partner or roommate moves in, they should get their own insurance to protect their valuables as it won’t be covered under the existing tenant’s insurance. 

If they sublet their space, they need to inform you and their insurer. The insurer may revoke contents insurance during the sublet as the risk of theft increases, but their liability will remain. If they choose to home-share their unit, and you agree to it, they should purchase additional coverage from on-demand insurance companies, like Duuo’s short term rental insurance. 

The bottom line

Hopefully this information helps you to consider requiring renters insurance for your tenants. The next step is to ask for proof of insurance (such as a current policy) on a regular basis to make sure it’s active and up-to-date. In fact, check out Duuo’s new Property Management Tool, which was designed to take the stress out of tracking insurance. Through the tool, property managers and landlords can easily track who has submitted insurance, verify its validity, and send out notifications to tenants who have not yet submitted proof of coverage.