October 30, 2018
States That Require Renters Insurance
Is it a legal requirement to have renters insurance in some states? The short, simple answer is no, but it can be a little more nuanced than that. While there are no states that require renters insurance there are laws that influence how insurance prices are set or capped. And, although it may not be legally mandated by state law, there can be a legal clause in the lease that makes it mandatory. Let’s unpack this apparent conundrum a little more…
What is Renters Insurance?
Sometimes called apartment insurance or tenant insurance, renters insurance does two main things. Firstly, it protects the personal belongings of the renter from theft, or damaged by fire, smoke, windstorm, vandalism or some other unfortunate incident. Secondly, it provides liability protection against lawsuits for bodily injury or property damage. For instance, if the tenant left a tap on, resulting in water damage to another tenant’s belongings and unit, the negligent tenant could be sued. Renters insurance may also cover the tenant’s additional living expenses when a home is destroyed or unlivable while repairs are being made.
What the Law States
There is no federal law requiring renters insurance. Housing laws – and the ability of the landlord’s insurer to subrogate against a tenant — vary from state to state. This stems from something called the Sutton Rule, a legal precedent set in Oklahoma that prevents the landlord’s insurer from suing the tenant for negligence. (Always check with your insurer and legal counsel, but this is a handy PDF reference guide to state-by-state subrogation rules.)
As well, some states have legislation that caps how much coverage can be required by the tenant. For example, in Oregon there is a law that says liability coverage may not exceed $100,000 for renters. Landlords must carry an equivalent policy. So, always, always know the state laws. As well, the insurance rates vary from state to state. Typical renters insurance rates are between $15 and $30 per month ($180 and $360 per year), depending on the state.
Renters Insurance Requirements in Leases
It’s not always a given that a landlord will oblige a tenant to have renters insurance. However, it’s becoming a more common requirement. Every state requires that a tenant comply with their lease, as a lease is a binding contract. If those terms include having renters insurance, your resident must make sure they’re covered.
It’s widely known that while homeowners protect themselves with insurance, many renters do not purchase renters insurance. (Recent stats show that a mere 1/3 of millennials carry insurance.) Landlords and property managers want to protect their residents. And ensure liability coverage if there’s an injury or if the tenant causes damages.
When signing a lease, a landlord can lawfully include a clause requiring renters insurance. And, even if a resident is on a month-to-month agreement, the landlord can legally change the terms of the agreement, making renters insurance a requirement. Some property management firms ask that the tenant provides proof of insurance before moving in, while others give tenants up to 30 days to show proof of insurance. If the renter fails to maintain coverage throughout the term of the lease, the tenant has violated the lease, and the landlord can start eviction proceedings.
How Can Landlords Ensure Continued Coverage?
The most important thing is education. Often residents mistakenly believe that their landlord’s policy covers them And, often younger renters don’t believe they have anything of value that needs coverage. But, when you tally up the costs of buying all new furniture, clothing, electronics, a few dollars a month for peace-of-mind protection is worth it.
Make sure that insurance is a required term in the lease for all residents. A centralized digital document repository can act as your database, giving you a view into the insurance status of every one of your residents. Be sure to ask for yearly reconfirmation of insurance renewal.
How Property Vista Helps
Here at Property Vista, our online module acts as an insurance audit system. This makes it easy to ensure that you have coverage for all your residents! And, we’ve teamed up with TenantSure to provide a built-in renters insurance program. It’s a snap to join and provides broad coverage at a great price.
We offer fully integrated tenant insurance offering that makes it easy and affordable for tenants to enroll. Be sure to check out our pricing.