If you’re applying to a house or apartment with a landlord that requires renters insurance, don’t be alarmed. It’s legal in most states and can actually be beneficial. Let’s look at the details.
Why is renters insurance a good idea?
Renters insurance helps protect your personal belongings. Many renters mistakenly believe that if there were to be a fire or flood, the landlord’s insurance would help cover the tenant’s personal property. This is not the case.
A landlord’s policy protects the landlord from financial losses. Except in cases of landlord negligence, they are not responsible for your personal property, even when disaster strikes.
For this reason, having renters insurance can be a lifesaver, especially if you have valuables that you would have trouble replacing if something were to happen (such as electronics, musical instruments, a laptop, stereo, or a bike).
Renters insurance can also limit your personal liability. If someone were to get injured at your house and try to sue you, your renters insurance policy can help pay for damages and protect your personal assets from lawsuits.
Why does my landlord want me to buy renters insurance?
Renters insurance provides an extra layer of liability protection for landlords.
If there is major property damage, a landlord’s insurance policy should cover the damages. However, the landlord is still on the hook for paying the deductible. This can cost thousands of dollars. If the property damage was a result of tenant negligence, the landlord’s insurance company can settle with the tenant’s renters insurance rather than taking out a claim against the landlord’s own policy.
Can a landlord legally require renters insurance in every state?
No. Some states like Oklahoma ban landlords from requiring renters insurance. Other states, like Virginia and Oregon, allow landlords to require it under certain conditions.
In Oklahoma, tenants are covered under the landlord’s insurance policy. Since their monthly rent payments helps pay for the landlord’s insurance premiums, Oklahoma law views them as co-insured on the landlord’s policy. In other words, they, along with the landlord, are a customer of the insurance company. In the eyes of the Oklahoma courts, any claim against the tenant is essentially the landlord’s insurance company taking out a claim against its own client. This law is known as the Sutton Rule.
Other states adopt variations of the Sutton Rule for fire insurance. This state-by-state guide gives more context to the legal requirements for each state.
In summary, Oklahoma views renters insurance as duplicate coverage. The landlord’s motivation to keep their own insurance premiums low is not seen as sufficient reason to require renters insurance.
In Virginia, a landlord is allowed to require renters insurance. However, renters insurance premiums are counted towards the security deposit limit. In other words, the annual cost of renters insurance and the cost of the security deposit must not exceed two months’ rent (the maximum allowable amount for security deposits in Virginia).
Oregon’s laws on renters insurance are a little more complicated. In order to require renters insurance, the landlord must take out their own liability insurance policy. Landlords must provide proof of coverage to any tenant who asks.
Under Oregon law, the amount of coverage for renters insurance cannot exceed $100,000 for liability. Any claims against the renters insurance policy must be greater than the amount collected for the security deposit. Claims are not permitted for normal wear and tear.
Landlords must respect Fair Housing laws and treat all tenants fairly. For example, landlords cannot require renters insurance only from members of a certain racial group, nor can they require renters insurance only for elderly tenants because they fear they may be more negligent. If you plan on requiring renters insurance, be sure to require it from all your tenants.
The one exception in Oregon is if the tenant makes less than 50% of the median area income. In this case, the tenant cannot be required to buy renter’s insurance.
Renters insurance requirements depend on your state, but even if you aren’t required to buy renters insurance, it’s still a good idea to look into different policies to protect your personal property and limit your liability. With some policies as cheap as $15 a month, it’s a small price to pay for your peace of mind.