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Why it is a good idea to require your tenants to carry insurance

If you are a commercial property owner, your days likely consist of making decisions and heading off disasters. Your tenants may barrage you with requests for repairs or upgrades, and you may have to clarify for them where your responsibilities end and theirs begin.

Many of those responsibilities are outlined in your tenant agreement. For example, you may agree to making repairs in the bathroom, but if the tenant wants new fixtures, he or she must replace them without cost to you. You may cover the cost of heat and water, but your tenant may have to pay the electric bill for his or her unit. However, have you made it clear to your renters who takes responsibility if a tenant's belongings are damaged or lost in a fire, flood or robbery?

How do I benefit from my tenants' policies?

If you do not require your tenants to carry renters insurance, experts say you may be placing yourself at great financial risk. Renters insurance covers a tenant's property loss whether from theft, natural disasters or vandalism. If a guest of your tenant becomes injured, for example bitten by the tenant's dog, renters insurance covers those injuries.

Florida and federal laws do not require renters to be insured the way drivers need insurance. However, the law permits you to include a requirement for your tenants to purchase insurance as a prerequisite for living in your building. Some ways in which renters insurance benefits you as a landlord include the following:

  • You can make your building pet friendly if your tenants' policies cover liability for animal bites.
  • When renters have their own insurance, you will likely make fewer claims on your policy, potentially avoiding frequent increases in your premiums.
  • Renters insurance often covers relocation expenses if a tenant must move because of damage to an apartment building, which means you won't have to pay for this.
  • Tenants will have coverage for damage to their belongings, which means they may not seek compensation from you.
  • You reduce your risk of someone naming you in a lawsuit since renters insurance covers injuries your tenants' visitors may suffer that are not related to any negligence on your part.

Many tenants have wrong assumptions about their landlords' insurance and what it covers. They may erroneously believe they have no need for a renters policy since your insurance will replace their belongings or protect them from liability. You may need to set them straight about this when you explain why you require them to have a renters insurance policy if they want to live on your property.

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