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Yours, Mine & Ours: Renters Insurance v. BOP Coverage

By November 10, 2022Millers News

If you are a landlord, protecting your rental property business is probably top of mind. When choosing businessowner’s coverage (BOP), you learned about its benefits in protecting your property, potential business interruption, and legal liability. But your tenants may not be aware that your insurance does not protect their possessions. The difference is explained in a simple vocabulary lesson.

Real Property vs. Personal Property

If you own some rental units, those are considered real property. This includes the physical buildings, the land the buildings occupy, equipment that is attached to the buildings (like HVAC units or ceiling fans), and any appliances that you purchase and which are installed in the buildings. It can also include equipment that you store at your rental properties that is used in managing your business, such as a lawnmower. Your BOP policy covers this real property.

Personal property refers to the moveable items that are owned or belong to your tenants. This includes furniture, clothing, and even technology that your tenant affixes to a wall.

If a disaster happens and your rental property burns to the ground, your BOP coverage comes into play. Structural damage to your real property and loss of the equipment and appliances in the building that you own are covered, up to the limits and deductibles outlined in your policy.

But what about your tenants’ personal property?

BOP coverage does not protect your tenants’ property. That’s why requiring your tenants to have renters insurance as part of your rental agreement is a good idea.

Renters Insurance: Good for Tenants and Rental Property Owners

Renters insurance offers many benefits for your tenants. With it, they will be able to cover the cost to replace their personal property if it becomes damaged, stolen, or destroyed. If one of their guests gets hurt while on your property, renters insurance can help cover the costs for that guest’s medical care or even the renter’s legal costs if they are sued. It can also help them pay for repairs if they are responsible for damaging your property.

That all sounds good for your tenants – but what about you?

Renters insurance has many benefits for rental property owners, one of the biggest being financial protection. Consider these scenarios:

  • A tenant has friends over and one friend trips on the stairs going up to the apartment and breaks an arm. The tenant does not have renters insurance, so the guest sues you, the landlord, for medical bills, pain and suffering.
  • A break-in results in a tenant’s high-end computer equipment being stolen. The tenant does not have renters insurance, so the tenant sues you, claiming the break-in was your fault.
  • A fire in one of your rental units means all tenants have to move to temporary quarters until renovations are complete. In some states, you will be required to provide relocation benefits. If your tenants have renters insurance, their policy can cover that expense.
  • Because so many renters own pets, you decide to welcome pet-owners as tenants. That decision comes with the risk of dog-bite liability and/or property damage. With renters insurance, your tenants can handle paying for those potential expenses.

Finally, when your tenants have renters insurance, it can help keep your own insurance premiums lower. Tenants with renters insurance may be less likely to make a claim against you because losses could be claimed on their own policy. Fewer claims means fewer chances of your premiums increasing.

Renters Insurance Reality Check

It’s a good idea to make renters insurance part of your lease agreements, stipulating that your tenants must show proof of having that coverage before they move in. But don’t let that be the last time you check. Tenants can cancel coverage or let insurance lapse and you would never know. Consider including a clause in your lease agreement requiring that tenants show proof of renters insurance as a condition of renewal.

Stay Ahead of Unexpected Challenges

Protect your tenants and your rental property by requiring proof of renters insurance before any move-in and renewal. Contact Millers Mutual to learn how we make the renters insurance process easy for your tenants and deliver peace of mind to you.