As a landlord, you may worry about the possibilities of water or fire damage in your rental properties—but there are other costs when tragedies strike your Orlando rental properties. When your tenants lose their belongings in a disaster, they may seek damages through your insurance via a lawsuit.
All of these concerns can be mitigated if you consider making renters insurance mandatory for your tenants. If you're an out-of-state investor, It's possible that your state will not allow for such a rule—so you should first confirm that local and state regulations allow for such a clause before you add it to the lease.
Making renters insurance mandatory for your properties is a significant benefit to both your business and your tenants' livelihoods.
If you're interested in investing in Orlando real estate, you're in luck: Florida allows investors and landlords to mandate renters insurance.
In Central Florida, Make It Mandatory
You'll want to carefully plan the best way to include a requirement of this kind in your lease. The key at the outset is to make sure that any applicants who will live in your Orlando rental properties have the information upfront. Rather than thinking of renters insurance as a new, separate expense, make sure that it is considered part of the total cost of renting the property. When it is factored in from the beginning, this additional expense becomes simple protection that can make the tenant experience more secure.
In fact, in an area where most landlords require it, your renters might find it odd to discover you don't include an insurance requirement in your lease. One way to make it much more straightforward is to keep track of the average premiums from a couple of reputable companies and share that information with tenants in the documentation about your rental property in addition to the lease. You can also include informative literature about the benefits of renters insurance so that they see why you require it.
Protect Your Tenants, Your Investment Properties, and Yourself
Imagine that your tenants have an unfortunate disaster, but it is of ambiguous origin. An extreme—but possible—scenario would be that of a house fire. Yes, the fire could be entirely based on tenant choices:
- Plugging in too many items in an outlet
- Overheated electrical components
- Smoking inside the rental home
- Unsafe appliance use.
However, it could also have been low-caliber electrical work in the home itself—perhaps work you never even knew was poorly done.
Regardless, you will be compensated by your insurance company because of your required house insurance—but a renter without renters insurance will have no recourse. If they think there is even a chance that fault could be found with you, they may choose to sue you for the damages to their belongings.
Everyone loses in this situation:
- The relationship between tenant and landlord is strained to the point of breaking
- The landlord goes through a costly legal battle
- The tenant still may not have compensation for the damaged or destroyed belongings.
The situation works so much better when renters insurance is involved.
- No lawsuits are needed (saving everyone money).
- The renters insurance covers and protects the tenant.
- The home insurance pays the landlord for structural damages.
For only a few dollars a month, this is a huge contributor to peace of mind.
The Premiums Are Affordable!
The idea of additional insurance might raise some concerns if one expects a bill on the order of home insurance or auto insurance. Still, most renters insurance policies are very reasonable.
An average renters insurance policy ($40,000 for personal property, a $1,000 deductible and $100,000 of liability protection) run around $200 a year, or less than $20 a month. For individuals who want more coverage or lower deductibles, the costs will be higher—but having any renters insurance is incredibly helpful in a bad situation.
When you make it clear that individuals who don't want to buy renters insurance can buy a minimal plan or choose to accept a high deductible, many potential renters will see the benefit of having at least some "catastrophic-level" insurance. Ultimately, when renters insurance is a requirement of your lease, choosing to opt-out of insurance means opting out of your property entirely.
Landlords don't pay for renters insurance
One of the biggest reasons for you to require this insurance is that it benefits you indirectly and costs you nothing. All you have to do is make sure that your rental information—including applications and advertising—make it clear that you consider renters insurance for your Orlando properties mandatory and that it is part of the lease.
Do everything you can to make the process of getting that insurance painless for your tenants, and they will be appreciative that they aren't stuck with the liability for their belongings hanging over their heads.
Your Property Manager Can Be the "Bad Guy"
While earning passive income and long-term wealth is the primary interest in owning investment real estate in Orlando, certain investors also happen to enjoy the fact that they provide people with a safe, appealing home. This can make it all the more challenging when your potential tenants refuse to keep up with the terms of your lease—including having appropriate renters insurance.
Thankfully, expert Orlando property management is an easy answer to a tough problem. Your property management partner can enforce the lease for you when it comes to a tricky tenant situation. An Orlando property manager is like a shield between you and your tenants so you can continue focusing on what matters: building your wealth through real estate.
Ready to get growing? Download Verandah Properties' FREE guide: "Real Estate Investing: Grow Your Portfolio." With inside tips from the property management experts, adding properties to your portfolio has never been easier!