Renters Insurance Required: A Win-Win for Apartment Owners and Tenants

By Barry Bridges 

In years past, an apartment-hunter might have been able to find a place with little more than the first and last month’s rent and a handshake.

But today, the conditions for signing a lease might include anything from a criminal background check to a pet interview.

Times have changed, and the changes go beyond the vetting process. A prime example is renters insurance, which has gone from something that your insurance agent might recommend to a lease stipulation.

An estimated 44 percent of property management companies require renters insurance at all of their properties, with another 40 percent making it mandatory at some of their properties, according to the National Multifamily Housing Council.

Why have so many apartment communities adopted mandatory renters insurance, and how should renters feel about it? The answer could be that necessity sometimes leads to positive outcomes.

The economics of insurance and liability

The trend toward mandatory renters insurance started gaining steam more than a decade ago.

In 2004, The Wall Street Journal reported that apartment companies had seen average increases as high as 50 percent in their property and liability insurance rates. In response, more property owners began making renters insurance mandatory.

The companies’ goal was to relieve the economic pressure by requiring tenants to share more of the risk and financial responsibility, possibly getting a break on their own insurance rates in the process.

At the time, many commercial properties faced higher prices for terrorism insurance as a result of the Sept. 11 attacks. In addition to the threat of property-damaging catastrophes, they were also facing the perennial concern of liability.

A renters policy that includes liability coverage could help reduce legal exposure for both tenant and landlord - if, for example, a guest suffers an injury on the property.

Sharing a cost and receiving a benefit

What made good financial sense for apartment companies in the early 2000s continues to make sense today.

What about renters, though?

Naturally, the idea of an apartment community’s ownership passing along costs to its tenants might not seem fair to all concerned. However, renters insurance offers tangible benefits regardless of whether you have your policy voluntarily or as a requirement of your lease.

• In addition to liability protection, renters insurance can offer contents coverage if your belongings are damaged, destroyed, or stolen - something that a landlord’s insurance typically doesn’t offer. And if you think an apartment can’t hold enough property to justify the cost of insuring it, consider the research suggesting that the typical renter of a 2-bedroom apartment has $30,000 worth of possessions.
• Renter’s insurance remains a bargain. In 2013, the average yearly cost of premiums was estimated at $188, or about $15 a month. Average premiums have stayed stable for most of the past decade.
• You might be able to save money if you bundle a renters policy with your auto insurance, so be sure to ask your agent about that option.

The fact that the estimated number of renters insurance policies increased from 29 percent to 40 percent between 2011 and 2015 suggests that more renters have come to realize its value, in every sense of the word.

Mutually beneficial solutions

Keep in mind that every requirement for renting an apartment serves some kind of purpose. While the list of prerequisites and procedures has grown longer - and arguably more tedious - something that might seem like a bother at first could turn out to be a blessing later on.

Don't think of renters insurance as one more hoop to jump through. Try to see it as turning a mutual necessity into a mutual benefit.

Related:

• Renters Insurance Helps Cover the Gaps
• The Inside Scoop on Renters Insurance and Roommates
• Hurricane Insurance: What Homeowners and Renters Should Know

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

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