How to Require Renters Insurance: Best Practice for Landlords and Property Managers

Requiring residents to provide proof of insurance before they move in is a smart decision and is becoming the norm across professional management. More tenants are working from home than ever leading to increased risk exposure for Landlords and managers. Many landlords are adding a new addendum to their lease that requires tenants to show and maintain proof of insurance. The problem is, most companies stop there, leading to lapsed or cancelled policies – leaving the landlord holding the bill for tenant caused damage. 
Unless you have a system in place to track your tenant’s insurance status, you’re wasting your time and ink on your lease. Residents treat the insurance requirement as a checklist item before moving in, and cancel shortly after. As a matter of fact, over one third of your tenants will cancel their policies after showing you proof.

Can a Landlord Require Renters Insurance?

Yes, a landlord can require a tenant to purchase renters insurance. If you’re debating whether to require your tenants to purchase and maintain a renters insurance policy, you need to do the following in addition to checking with your state laws:
  1. Add provisions to your lease that spell out the details of the new requirement.
  2. Draft an insurance addendum that requires a tenant to purchase and maintain renters insurance during their lease.
  3. Have tenants list you as an Interested Party on their policy.
  4. Attach the insurance addendum to new leases and lease renewals.
  5. Verify your tenant’s policies.
  6. Request their policy information on a regular basis to ensure compliance.
In most states, the landlord can also determine the amount of liability coverage that the tenant must have. In Oregon, a landlord may only require up to $100,000 in liability coverage and must also maintain comparable liability insurance. Oklahoma has banned any landlord from requiring renters insurance.
Landlords aren’t allowed to require renters insurance from tenants that are mid lease. It’s important to make note of this and begin the new requirement when you and your staff have prepared to answer questions regarding the new requirement. However, it’s equally important to note that unless you have a Property & Casualty insurance license, you aren’t allowed to answer questions about coverage details with your tenants. Partnering with a renters insurance compliance agency can eliminate your workload and manage your insurance program for you. 

What happens if an uninsured tenant causes damage?


One of the most common causes of damage to an apartment is due to fire. If a tenant starts a fire in an apartment complex, the typical cost is anywhere between $60,000 – $100,000 – often times even more. Although sprinkler systems effectively put out fires, they inevitably flood units around where the fire started. Sprinklers put out as much as 100 gallons of water per minute. There is nothing more effective than a sprinkler in putting out a fire. However, sprinkler systems are commonly activated by mistake. Accidental activation of sprinklers include excess smoke from food preparation, freezing, and mechanical damage – tenants hanging their clothing from the sprinkler.

Uninsured tenant cost breakdown

Let’s break this scenario down further and analyze initial and future costs for the landlord and tenants. The landlord’s general liability policy will suffer the loss – the claim will be filed on the landlords insurance policy. The landlord’s general liability policy will only cover the damage to the structure/property of the building. It will NOT cover any tenant’s Personal Property. The landlord will also have to pay the deductible out of pocket. Deductibles are the amount the insured pays out pocket before the insurance company starts to pay. Property insurance deductibles for multifamily owners is generally $15,000 – $50,000 per building. 
Since the tenant caused the fire, they may be responsible for paying the deductible later on. The landlord or the landlord’s insurance carrier may subrogate against the tenant for the cost of the deductible – usually $10,000 – $50,000. They also will likely subrogate for damage caused by the negligent tenant – suing the tenant for damages.
In this very common scenario, the tenant is liable for the deductible and damage to the property. Neighboring units are likely to be affected too. Their personal property may be damaged due to the fire, further increasing the total amount of damage caused. 
Requiring your residents to have renters insurance has a lot of upside, but it’s important to consider the negatives too. Let’s take a look at both.

Pros of requiring renters insurance:

  • Tenants are far more likely to financially recover from an unexpected event.
  • You’re an advocate for your tenant and their financial health.
  • Reduced exposure to tenant caused damage.
  • Less claims on the landlord’s General Liability policy.
  • The tenant’s hotel costs are covered if their unit is damaged an uninhabitable.
  • Confidently increase your deductible.
  • Stabilize or reduce your property insurance premiums.
  • The more tenants who have renters insurance, the larger the aggregate amount of coverage you have at your building.

Cons of requiring renters insurance:

  • Your staff has to manage renters insurance policies.
  • Cancelled policies are impossible to track.
  • Legal costs to draft an addendum.
  • Lack of renters insurance knowledge amongst staff.
  • Residents don’t like being told what to do.
  • Requiring renters insurance will cost staff time, costing you money.
  • Your staff should be focused on leasing, not managing renters insurance policies.

How to Require Renters Insurance without the Cons

Glazd renters insurance program is a robust solution to any renters insurance requirement. We help multifamily owners and operators require renters insurance at their properties without the hassle of managing it. This allows you to reduce your risk without the workload. Our program tracks all of your leases and the renters insurance policies associated with them. Never get stuck paying the deductible because a tenant accidentally left their bath tub running. In addition, we help our partners get off the ground as soon as possible by providing a lease addendum to attach to the lease. If you’re interested in learning more reach out to us!