Importance of Rental Insurance
Rental insurance doesn’t just protect your tenants but also protects you from financial risks. A property management company can help you to get Rental Insurance without any risks.
So, what is rental insurance and how can you and your tenants benefit from it? Also known as tenants insurance or renters insurance (in Western countries), rental insurance is a policy that covers your tenants’ personal property and contents. Rental insurance does not cover the building and structure. In some cases, it covers the structure if the tenant has made and paid for renovations to the structure.
Much like home insurance, rental insurance insures tenants from fire, theft and other common perils. Since rental insurance generally does not cover structure and only the tenant’s personal properties, it is significantly cheaper than home insurance.
One of the most common reasons why tenants refuse to take rental insurance is because they view it as a long-term commitment. This disposition is wrong as rental insurance policy is flexible in terms of the policy tenure. Depending on your lease, the policy usually starts from 1 year and goes up to 5 years.
There are two primitive types of coverage: content coverage and liability coverage. Content coverage protects your tenants against repair or replacement of personal properties while liability coverage protects them when they or their
guests damage the building or structure. Liability coverage also covers your tenants if someone is injured within the confines of their rented property due to a building-related incident. While all rental insurance policies offer content coverage, liability coverage is often viewed as an add-on as it can increase the policy premium and home insurance already covers the property.
If your property requires renovation or immediate repairs that may require your tenants to move out temporarily, the rental policy will allow tenants to be reimbursed for temporary lodging for the duration of the renovation.
Rental insurance also benefits you because when your building or structure is damaged by your tenant, the policy will also cover this. However, it is best to review rental policies and add-ons as this feature might not be available in all policies.
At the same time, both you and your tenants should be aware of what a rental policy will not cover. While earthquakes and floods are now covered by most policies, other acts of god and man-made acts (terrorism or riots) are not covered by these policies. So, it is advisable to discuss with the policy provider on what the policy will add, will not cover. It is also necessary to find out which of your personal properties will not be covered by the policy provider. While jewelry, furniture, appliances, and personal gadgets are commonly covered, certain items such as old furniture or precious items such as collections of art or similar items may not be covered either due to the cost of replacement or age of the item.
The chances of your tenants not taking a rental policy are higher if you don’t encourage or make rental insurance mandatory. The Rental Management Company like OwnersTown can help you out with all these problems.
The way to approach this is to present rental insurance as a necessity. One of the common reasons why tenants don’t consider rental insurance is the cost of premiums. But, as discussed in this article, they are considerably cheaper than home insurance.
Some property owners in major Indian cities have already made rental insurance compulsory and have written it into rental agreements. The reason being that once the agreement is signed without this clause, tenants cannot be pushed into buying rental insurance as they generally view rental insurance as unnecessary. However, as a property owner, it is best to have your tenants buy a policy.
Over the last few years, house owners have become more and more aware of rental insurance and some have made it mandatory. Ask your policy provider if they provide rental insurance. If yes, recommend the same to your tenants. If not, find a rental policy provider such as HDFC Ergo. This will protect you from incidental damages caused by the building and structure and upon your tenants.