As an owner or manager in the multifamily space, it’s imperative to take every opportunity to transfer risk away from assets. This can be achieved by requiring any contractors working on the premises to provide proof of insurance and name the owner and manager as an additional insured.

However, one of the most underutilized tools is requiring tenants to carry Renter’s insurance. Why is this an advantage? While Renter’s insurance is designed to cover the possessions of the policyholder, it provides liability coverage for the building owners as well. Every Renter’s insurance policy will include, at a minimum, a $100,000 limit of general liability. So how does this help the building owner?

When there’s a claim at a property (whether it’s damage to property or injury to a person), the injured party will be looking to cover the damage. Typically, they first contact either the building owner or the property manager. However, if the loss is a result of tenant negligence, the liability coverage of their Renter’s policy can cover the loss up to the limit of coverage they carry.

A property owner with a multi-tenant apartment building can reap the benefits of Renter’s insurance. For example, a tenant could open a window during the winter months to cool off but may forget to close it before they leave town for the weekend. Due to the open window, the room and subsequently the pipes freeze. The frozen pipe bursts, and the leakage damages the units below.

If the tenant carries Renter’s insurance, they would have at least $100,000 of liability coverage for the damage to the property as well as their personal belongings within the unit. While it may or may not be enough to cover the entire loss, Renter’s insurance prevents the loss, or at least a majority of the loss, from going to the building owner.

When attempting to transfer and/or reduce risk, requiring tenants to carry Renter’s insurance is a valuable tool for both the property owner and manager.

To learn more about Renter’s insurance or any other risk transfer methods, contact an MMA advisor today!

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