Making sure the properties on your rent roll are properly insured is a no-brainer for most real estate agencies. But what about your tenants? How much does their insurance really matter?
Now, I might be a little biased, but I think most property professionals would agree that landlord insurance isn’t just important, it’s essential.
It provides a financial safety net against many of the risks that come with owning a rental property, from natural disasters and tenant damage to loss of rent and legal liability.
I’ve seen first-hand the impact on landlords who weren’t adequately insured, and it’s not a position anyone wants to be in.
That’s why I’m a strong advocate for ensuring the right cover is in place.
Many real estate agencies even make it a requirement for properties on their rent roll to be insured. And for good reason.
An uninsured rental isn’t just a risk for the landlord, it can expose the agency to serious financial and reputational consequences too.
But what about uninsured tenants? While an uninsured tenant might not pose the same risk as an uninsured landlord or rental property, there are still good reasons why tenant insurance should be on your radar.
Chances are, you’re already asking new tenants if they have contents insurance during the onboarding process and if they do (or you help them arrange it), that’s one less thing to worry about.
But more often than not, the answer is no, they don’t have it or don’t think they need it.
In fact, some stats suggest that anywhere between 40 to 60 per cent of renters go without insurance.
So, why don’t tenants take out cover?
“I don’t own much” – a common misconception
Many tenants think contents insurance isn’t necessary because they don’t believe they own enough to make it worthwhile. But that’s rarely true.
Even in a furnished property, most tenants have personal items that would be costly to replace (phones, laptops, clothing, kitchenware, bedding, and more).
It doesn’t take much for those costs to add up. If disaster strikes, like a fire, flood or burglary, replacing everything out of pocket can be financially overwhelming.
Insurance is often the difference between a quick recovery and a long, stressful financial rebuild.
Tenants might think landlord insurance covers their stuff
Many tenants assume the landlord’s insurance covers their belongings, but it doesn’t. Landlord insurance protects the building and the landlord’s property, not the tenant’s personal items.
Only in rare cases, like if the landlord is legally negligent, would tenant losses be covered.
This misunderstanding can lead to disputes if tenants try to hold landlords or agents responsible for their losses.
The number one reason tenants SHOULD consider insurance
Tenant insurance typically includes legal liability coverage.
This means if a tenant is found liable to pay compensation to someone because they have accidentally injured them or damaged their property, the tenant can seek compensation from their insurer.
For example, if a guest trips over something left unsafe by the tenant and gets hurt, the tenant could be held legally responsible for medical bills, lost income, or other compensation costs.
Without this coverage, tenants may face significant financial burdens from legal claims that could run into thousands or even hundreds of thousands of dollars.
In these situations, tenants might mistakenly try to hold landlords or property managers accountable, leading to disputes and complications.
Having legal liability coverage through tenant insurance not only safeguards tenants financially but could also help prevent unnecessary conflicts, ensuring landlords and agents aren’t unfairly drawn into costly legal battles.
Subrogation: Another key reason to encourage tenant cover
Another scenario agents may encounter: a tenant accidentally causes damage (e.g. a kitchen fire), and the landlord makes a successful insurance claim.
While the landlord gets their payout, the insurer may then pursue the tenant to recover the cost. This is a process called subrogation.
If the tenant does not have insurance, this can lead to:
- Direct legal action against the tenant
- Confusion or claims directed at the landlord or agent
- Unnecessary tension in the tenancy relationship
However, if the tenant has contents insurance with legal liability cover, their insurer may step in to manage or settle the recovery claim. This means:
- Fewer disputes reaching your desk
- Less involvement in mediation following tribunal matters
- More protection and peace of mind for all parties
Encouraging tenants to take out contents insurance with liability cover not only protects them, it makes things simpler for landlords and agents too.
Additional tenant protections
Some tenant insurance policies can also cover:
- temporary accommodation costs and pet boarding if contents are damaged by an insured event and the tenant can’t live there,
- the cost of repairing or replacing contents due to loss or damage by an insured event,
- theft of contents, and
- the cost of replacing lost keys and the changing of the locks.
If something happens to a tenant’s contents and they don’t have insurance, they might even blame the landlord for damage and try to recoup losses that way.
With insurance, the tenant (and landlord) can feel secure that they have a safety net if things go wrong.
The bottom line
While EBM RentCover doesn’t offer tenant insurance, we know it plays an important role in protecting tenants, and by extension, your landlords.
That’s why we think it’s worth the conversation. Understanding how tenant cover works can help you better support clients, manage risk, and avoid potential frustrations down the track.
On our end, EBM RentCover landlord insurance policies provide protection for the landlord against tenant-related losses, from damage to loss of rent and liability.
If you would like to learn more, reach out to your Relationship Manager. Not working with us yet? We would love to chat.
