It would be simply unwise to risk losses due to fire, floods, strong winds, and other events that are not categorized under acts of God. Secondly, recovering the loss from tenants who do not have a policy is almost impossible, with current data showing 1:50 odds in collecting these types of liens.
If you are one of the few who is not concerned about renter’s insurance, here are some profound reasons why you should make it compulsory.
Reducing Exposure to Risks
Standards for insurance differ between states and there is good chance your property owner’s insurance will not fully cover you from liability. Certain renter’s insurance even covers medical expenses when a guest or resident is injured on the property. Property managers who might be living on the property could presume their homeowner’s policy would be adequate, however, in most instances it is not, and you need an additional policy.
Most leases hold tenants responsible for any damage they cause to their units, irrespective of having coverage or not. However, the real question is whether it is possible for property management to collect based on the lease deed. In most cases, it is almost impossible for property management to collect because tenants hardly have any balance in their bank accounts. Well, who really does? This ongoing recession has not helped any in this regard either.
Installment plans are not practical, especially the ones that are going to exceed the term of the lease, which they often do. Property management can obtain a lien if the tenant suddenly vacates the property, but odds of collecting are extremely small.
Reducing Operating Expenses
The purpose of renter’s insurance is for providing protection against losses due to accidents. Losses can mean many things, apart from repairs to the structure or replacing appliances after a fire. For instance, who will bear the loss of rent when the resident has to relocate temporarily during the repairs? There is also the cost of temporary storage of the tenant's personal property during this relocation.
Moreover, when there is not any insurance, how much will property management will have to spend on legal fees for defending their lien claim? The best solution is renter’s insurance, which protects the tenants and property management or property owners.
Cost of Coverage is not Much
Insurance costs money and property management might have to find an adequate policy that is affordable. However, it is not difficult, as many insurance providers have comprehensive policies that provide protection to all stakeholders. Whether property management pays for the coverage and adds it to the rent, or makes coverage mandatory for residents, it is a matter of policy and strategy.
Some property management companies even agree to pay a part of the coverage cost, but most pass it on to the resident. However, the cost of such policies is nothing significant, and most tenants will not mind paying the cost when they consider the risk coverage or what they get in return.