Why You Should Require Renters Insurance: A Landlord's Guide to Protecting Your Investment

By PropsManager Team · Rent & Finance · Jul 28, 2025

I learned this lesson the hard way. Back in 2019, a tenant's space heater caught fire in one of my duplex units. The damage to the building was covered under my landlord policy—$38,000 in structural repairs. But the tenant lost everything. Clothes, furniture, a laptop with her graduate thesis on it. She didn't have renters insurance.

Guess who she tried to sue?

That single incident cost me $12,000 in legal fees before it was dismissed. If she'd had a $15/month renters insurance policy, none of that would have happened. Not the lawsuit. Not the stress. Not the six months of back-and-forth with attorneys.

Today, every single one of my leases requires proof of renters insurance before I hand over keys. Period. And if you're not doing the same, you're leaving yourself exposed to risks that are completely avoidable.

What Exactly Does Renters Insurance Cover?

Before we dive into the "why," let's clear up what renters insurance actually is—because most tenants have no idea.

Renters insurance is a policy purchased by the tenant (not the landlord) that typically covers three things:

Personal Property Coverage

This covers the tenant's belongings—furniture, electronics, clothing, appliances they brought in—against covered perils like fire, theft, vandalism, and certain water damage events. A standard policy covers $20,000 to $50,000 in personal property, depending on the plan.

Liability Coverage

This is the big one for landlords. If your tenant causes injury to someone else—or damages someone else's property—liability coverage kicks in. We're talking $100,000 to $300,000 in standard coverage. That's the tenant's insurance paying, not yours.

Additional Living Expenses (ALE)

If the unit becomes uninhabitable due to a covered event—say, a kitchen fire—the policy pays for the tenant's temporary housing. Hotel stays, short-term rentals, even meals. Without this, displaced tenants often expect the landlord to foot the bill or withhold rent indefinitely.

Why Smart Landlords Make Renters Insurance Mandatory

Let me be blunt: requiring renters insurance isn't about being difficult. It's about running your rental business like an actual business.

It Shields You from Liability Claims

Here's a scenario that plays out more often than you'd think. Your tenant has a friend over for dinner. The friend trips on a loose rug in the living room and breaks their wrist. The friend sues—not the tenant, but you, the property owner.

With renters insurance that includes liability coverage, the tenant's policy handles the claim. Without it? You're defending yourself out of pocket, or your landlord policy premiums spike because you filed a claim that wasn't really yours to file.

According to the Insurance Information Institute, the average liability claim on a homeowner's or landlord policy exceeds $30,000. That's a lot of rent checks going to legal defense instead of your bottom line.

It Eliminates "Blame the Landlord" Disputes

This is the one that saves my sanity more than anything else. When tenants don't have renters insurance and something goes wrong—a burst pipe, a break-in, a storm that blows out a window—they instinctively look to the landlord to make them whole.

"My TV got ruined when the pipe burst. You need to replace it."

No. I don't. My insurance covers the pipe and the drywall. Your renter's insurance covers your TV. But try explaining that to an angry tenant who just lost $3,000 in electronics and has no coverage. It turns into a dispute, sometimes a legal one, and always a headache.

When tenants have their own policy, the conversation is simple: "File a claim with your insurance company." Done.

It Protects Against Tenant-Caused Damage to Other Units

If you own a multi-unit building, this is critical. Tenant in Unit 3 leaves a candle burning and it damages Unit 4. Without renters insurance, you're potentially caught in the middle of a dispute between tenants, or worse, paying out of your own policy to cover a neighbor's losses caused by another tenant's negligence.

A renters insurance liability clause covers damage the policyholder causes to adjacent units. That's tenant-to-tenant protection that doesn't touch your policy at all.

It Reduces Your Insurance Costs

Here's something most landlords don't realize: some insurance carriers offer lower premiums on landlord policies when you can demonstrate that all tenants carry renters insurance. Why? Because the risk of claims against your policy drops significantly.

I've seen discounts ranging from 5% to 15% on annual premiums. On a policy that costs $1,800/year, that's $90 to $270 back in your pocket—every year, across every property.

It Covers Relocation Without You Footing the Bill

When a unit becomes uninhabitable—fire, flood, major structural issue—where does the tenant go? If they have renters insurance, the ALE provision covers temporary housing. If they don't, you've got a displaced tenant who can't pay rent, might demand you cover their hotel, and could potentially claim constructive eviction.

I had a water heater fail catastrophically in a ground-floor unit once. Flooded the whole apartment. The tenant had renters insurance. She filed a claim, stayed at an extended-stay hotel for three weeks while we repaired the unit, and moved right back in. Zero drama. Zero cost to me beyond the actual repair.

Compare that to the landlord down the street who had the same situation but no insurance requirement. His tenant demanded $4,200 for hotel costs and threatened to withhold rent. It took months to sort out.

How Much Does Renters Insurance Actually Cost?

This is the part where pushback from tenants usually evaporates. Renters insurance is shockingly affordable.

The average renter in the U.S. pays about $174 per year—roughly $14.50 per month. That's less than a single Netflix subscription. For context, that's about 1% of what the average renter pays in monthly rent.

According to the National Association of Insurance Commissioners, only about 55% of renters carry renters insurance. That means nearly half your tenant pool is completely unprotected—and by extension, so are you.

How to Implement a Renters Insurance Requirement

Making renters insurance mandatory isn't complicated, but you need to do it right to make it enforceable.

Add It to Your Lease Agreement

The requirement needs to be spelled out clearly in your lease. Include:

• Minimum coverage amounts (I recommend at least $100,000 liability and $20,000 personal property)
• Requirement to name you as an "interested party" (not additional insured—there's a legal difference)
• Proof of insurance due before move-in and annually at renewal
• Consequences of lapse (typically a lease violation that can lead to non-renewal)

If you're using digital lease agreements, you can build the insurance requirement directly into the signing workflow so nothing gets overlooked.

Require Proof Before Move-In

Don't hand over keys until you've got a declarations page or certificate of insurance in hand. This is non-negotiable. I've had tenants promise they'd "get it next week" and then never follow through. If it's not done before move-in, it won't get done.

Set Up Automatic Tracking

This is where most landlords drop the ball. They require insurance at move-in but never verify it stays active. Policies lapse. Tenants cancel after the first month. And suddenly you're exposed again without knowing it.

With PropsManager's document tracking features, you can store insurance certificates, set expiration reminders, and get notified when a tenant's policy is approaching renewal. It takes the manual follow-up out of the equation entirely.

Offer Recommendations, Not Requirements for Specific Carriers

You can require tenants to have renters insurance. You generally cannot require them to use a specific insurance company (though laws vary by state). What you can do is provide a list of 3–4 carriers with competitive rates to make it easy. Lemonade, State Farm, GEICO—there are plenty of options that offer online sign-up in under 10 minutes.

Common Tenant Objections (And How to Handle Them)

You're going to get pushback. Here's what tenants say and how I respond.

"I can't afford it."

Yes, you can. It's $15 a month. That's less than two coffees at Starbucks per week. If a tenant genuinely cannot afford $15/month for insurance, that's a red flag about their overall financial stability, honestly.

"My stuff isn't worth insuring."

It's not just about your stuff. It's about liability. If you accidentally start a fire or flood the unit below you, you're personally liable for potentially tens of thousands of dollars. The insurance protects you from financial ruin, not just from replacing a couch.

"The landlord's insurance covers me."

No, it doesn't. A landlord's policy covers the structure, not the tenant's belongings or the tenant's liability. This is the most common misconception, and it's worth addressing directly in your lease and during the application process.

"I've never needed it before."

Nobody needs insurance until they do. A break-in, a kitchen fire, a burst pipe—these aren't theoretical risks. The National Fire Protection Association reports that U.S. fire departments respond to an average of 358,500 home structure fires per year. That's nearly 1,000 per day.

What to Include in Your Renters Insurance Lease Clause

Here's a checklist for drafting a solid renters insurance requirement:

• Minimum personal property coverage amount ($20,000+)
• Minimum liability coverage amount ($100,000+)
• Landlord named as "interested party" on the policy
• Proof of insurance required before key handover
• Annual proof of renewal required
• Policy must remain active for the duration of the lease
• Notification to landlord if policy is canceled or lapses
• Consequences for non-compliance clearly stated
• List of recommended (not required) insurance providers
• Statement clarifying landlord's insurance does not cover tenant belongings

Keep your lease agreements updated with current requirements. And if you're managing multiple properties, a platform like PropsManager can help you standardize these clauses across your entire portfolio.

Legal Considerations by State

Can you actually require renters insurance? In most states, yes. Landlords have broad authority to set lease conditions, and requiring renters insurance is widely considered legally permissible.

However, a few things to watch:

• Virginia passed a law explicitly allowing landlords to require renters insurance, setting a precedent other states have followed.
• Oklahoma allows the requirement but caps what landlords can mandate at $100,000 liability coverage.
• Some states require that the insurance requirement be disclosed before lease signing, not buried in fine print.
• You typically cannot profit from the requirement—meaning you can't require tenants to buy through a carrier that gives you a kickback.

Always check your local and state regulations. When in doubt, have a real estate attorney review your lease clause. The $200–$400 for a legal review is nothing compared to the cost of an unenforceable clause.

If you're navigating security deposit disputes or other tenant issues, having renters insurance on file often simplifies the process dramatically.

The Real-World Math: Why This Pays for Itself

Let's run the numbers on a hypothetical scenario.

Without renters insurance requirement:

• Tenant causes kitchen fire. Damage to unit: $22,000 (covered by your policy).
• Your deductible: $2,500.
• Tenant's lost property: $8,000 (tenant sues you; legal defense costs $6,000).
• Insurance premium increase next year: $400.
• Total out-of-pocket: $8,900+ (plus stress and time).

With renters insurance requirement:

• Same fire. Same $22,000 in structural damage. Same $2,500 deductible.
• Tenant files claim on their own policy for $8,000 in belongings. Covered.
• No lawsuit. No legal fees.
• Your premium may still increase, but no liability claim means smaller impact.
• Total out-of-pocket: $2,500 (just your deductible).

That's a $6,400 difference from one incident. And fires aren't even the most common claim—water damage and theft are far more frequent.

How PropsManager Simplifies Insurance Tracking

Managing renters insurance requirements across a portfolio of properties can get chaotic fast. One tenant's policy expires in March, another in July, a third forgot to renew entirely.

PropsManager lets you:

• Store insurance documents digitally alongside each lease
• Set automated reminders before policies expire
• Track compliance across all properties from a single dashboard
• Flag tenants whose insurance has lapsed so you can follow up immediately

No more spreadsheets. No more sticky notes. No more finding out a tenant's insurance lapsed six months ago when you actually need it.

Want to see how it works for your portfolio? Request a demo or check our pricing plans to find the right fit.

Explore More PropsManager Resources

Looking for the right property management software? Check out our in-depth guides:

• Compare Property Management Software — See how PropsManager stacks up against Buildium, AppFolio, Rent Manager, and Propertyware.
• Software for Small Landlords — Built for landlords managing 1–50 units without the enterprise price tag.
• AI-Powered Property Management — Discover how automation can save you 5–10 hours per week.
• Solutions for Property Managers — Scale from 50 to 500+ units without scaling your costs.

Frequently Asked Questions

Can a landlord legally require renters insurance?

Yes, in most U.S. states, landlords can legally require tenants to carry renters insurance as a condition of the lease. This is widely recognized as a reasonable lease requirement. A few states have specific rules about coverage caps or disclosure requirements, so always verify your local regulations. The requirement should be clearly stated in the lease agreement and disclosed before the tenant signs.

What happens if a tenant lets their renters insurance lapse?

A lapsed policy is typically treated as a lease violation. Depending on your lease terms, you can issue a notice to cure (giving the tenant a set number of days to reinstate coverage) or, in extreme cases, begin non-renewal proceedings. Being named as an "interested party" on the policy means the insurance company will notify you directly if the tenant cancels or fails to renew—giving you a heads-up before you're left exposed.

Should I require tenants to name me as an additional insured?

Not exactly. The better approach is to be named as an "interested party" rather than "additional insured." An interested party receives notifications about policy changes, cancellations, or lapses. An additional insured actually has coverage under the tenant's policy, which creates legal complications and is generally unnecessary for landlords who have their own property insurance. Most insurance agents understand the distinction and can set it up correctly.

How much renters insurance should I require tenants to carry?

A minimum of $100,000 in liability coverage and $20,000 in personal property coverage is a solid baseline for most rental properties. For higher-value units or multi-family buildings, you might increase the liability minimum to $200,000 or $300,000. The personal property amount is really for the tenant's benefit—the liability coverage is what protects you. Keep your minimums reasonable; requiring $500,000 in liability for a studio apartment might be seen as excessive and could be challenged.

Does renters insurance cover damage caused by pets?

Most standard renters insurance policies include liability coverage for pet-related incidents—like if a dog bites a visitor or damages a neighbor's property. However, many policies exclude certain dog breeds (pit bulls, Rottweilers, etc.) or exotic animals. If you allow pets in your rental, it's worth requiring tenants to confirm their insurance policy specifically covers their pet. Some tenants may need to add a pet liability rider, which typically costs an extra $5–$10 per month.