Verifying tenant insurance per the lease agreement is necessary for several reasons:
- Risk Management: Tenant insurance helps mitigate risks for both the tenant and the landlord. It provides coverage for the tenant’s personal belongings in case of theft, fire, or other covered events. This reduces the financial burden on the tenant and helps ensure they can recover from unforeseen circumstances.
- Liability Coverage: Tenant insurance typically includes liability coverage. This protects the tenant in case someone is injured on the rented property and holds the tenant responsible. It also protects the landlord from potential legal claims arising from such incidents.
- Protecting Landlord’s Property: While landlord insurance covers the structure of the building and any landlord-owned contents, it does not cover the tenant’s personal belongings. Requiring tenants to have insurance ensures that their belongings are protected, reducing potential disputes and liability for the landlord.
- Preserving Rental Income: In case of damage to the property due to a covered event, tenant insurance can provide coverage for additional living expenses if the property becomes uninhabitable. This helps ensure that tenants can afford alternative accommodations while repairs are being made, thus preserving the rental income for the landlord.
- Compliance with Lease Terms: Verifying tenant insurance ensures that tenants are complying with the terms of the lease agreement. It’s a standard requirement in many lease agreements and failing to provide proof of insurance may be grounds for eviction or other legal action.
- Peace of Mind: Knowing that tenants have insurance coverage can provide peace of mind for both landlords and tenants. Landlords can be reassured that their tenants are financially responsible and able to handle unexpected events, while tenants can feel secure knowing their belongings are protected.
Having the owner and property manager listed as Additionally Insured as it pertains to the tenant’s insurance is best practice. It is common to accept the Certificate of Insurance as the only verification form, however this document states, “This certificate is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not affirmatively or negatively amend, extend or alter the coverage afforded by the policies below. This certificate of insurance does not constitute a contract between the issuing insurer(s), Authorized representative or producer, and the certificate holder.” Therefore, it is recommended that a copy of the Additionally Insured endorsement be requested as verification.
Many leases require tenants to have Workers Compensation Insurance. As a best practice a Waiver of Subrogation endorsement should be requested as part of the Workers Compensation Insurance verification process.
Overall, requiring tenant insurance and verifying the coverage is maintained as part of the lease agreement is a common-sense precaution that benefits both parties involved in the rental agreement.
Minnis Property Management actively monitors each tenant’s required insurance as outlined in the lease and obtains copies of any tenant required insurance policies.