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Renters Insurance: Tenant Versus Landlord

Ginny: I have been a resident at an apartment community for several years and I am in the middle of a one-year lease. The property recently changed ownership and the new owner’s property management company has just sent me a letter demanding that I double the amount of the minimum coverage for my renters insurance policy.

I don’t mind having the renters insurance, as it protects me, but I think that the current minimum of $50,000 is sufficient and I shouldn’t have to pay for a $100,000 policy.

Is it legal for my property manager to demand an increase in my minimum renters insurance coverage while my current lease agreement is still in effect with a $50,000 minimum?

Steven: There are really two issues here. The first is: Can the new owner require you to have a renters insurance policy with a $100,000 minimum? The second is that if the owner can require the new higher minimum, can it require you to obtain such a policy and show proof of the required coverage while you have a valid and binding lease with set terms already in place?

I believe that the new owner can require you to have renters insurance and it can also set the minimum policy limits. Of course, the owner needs to realize that this is an additional expense to its tenants and could be a deterrent or competitive disadvantage if other rental properties in the area do not have the same requirements.

I am an advocate for renters insurance and believe that tenants should make their own decision as to the proper amount of coverage. I will discuss some of the important factors to consider below.

So the real question is the timing of the required change in minimum coverage limits for your renters insurance policy. As with all terms that are set for the term of a lease, you cannot be required to comply with the new terms until the expiration of your current lease unless there is a specific clause allowing for such a change.

This is not very common, but an example would be if you had a long-term lease stating that the rent would be adjusted at some point during the lease.

It is extremely unlikely that your former landlord would have any language allowing for increases in renters insurance minimum coverage during the lease term. So I would suggest you send your new owner’s property manager a brief letter indicating that you are not required to obtain the insurance it is requiring during your lease. Your new owner may not be aware that the change of ownership has no bearing on the validity of your current lease.

The new owner can change the terms at lease renewal but not during the current lease term. The only other exception would be if there is a mutual agreement of both the tenant and the landlord.

To see if you would actually want to consider increasing your renters insurance coverage from $50,000 to another amount, you need to get some professional advice from a competent insurance agent, as there are many important aspects to making sure you have the proper insurance coverage.

While I can give you some general feedback to your question, I strongly suggest you contact your insurance broker and ask about an HO-4 policy.

When done properly, obtaining the right insurance policy with all of the coverage you need plus an understanding of what you don’t need is very personalized. You need to discuss not only policy limits for your contents or possessions, but also the appropriate limits for liability, which would cover you if someone were to be injured in your home.

In other words, you may think that your worldly possessions are worth only $50,000 and that your current policy limits are sufficient. But you need to ask about your current policy’s limits for liability.

Liability coverage is to protect you if someone gets hurt or injured (maybe a slip-and-fall) in your home, and it is my personal opinion that $50,000 is not much coverage to protect you from a liability suit.

You will want to probably start with a basic HO-4 policy, but after consulting with your insurance professional you may also want special coverage or riders added if you have certain valuable collectibles or possessions, or if you participate in certain risky hobbies or activities.

Alternative-living expenses (ALE) is also coverage that may be worth considering.

You will want to evaluate the cost of your customized insurance and see how much of the risk of a covered loss that you are willing to accept yourself. This is known as the deductible (or simply the amount you pay before your insurance policy offers coverage) and you can usually reduce your insurance premiums if you have a higher deductible. But the right level of deductible is also a personal decision that only you can make.

Send your new landlord a letter and make an appointment with your insurance professional. Your landlord may have actually helped you determine that your current renters insurance policy is not exactly what you need. If you still think that your current policy is sufficient, then you will need to convince your landlord that its higher required limits are unreasonable or you will have to find a new place to live.