Renter’s insurance covers losses for tenants in the event of a disaster, as property insurance purchased by owners does not cover renters. Some leases require renters to obtain insurance, especially in disaster-prone areas. Failure to obtain insurance may result in the loss of the tenant’s rights to the property.
Renter’s insurance covers losses inherited by the lessee of a rental property in the event the lease is canceled due to some type of disaster that tears the property apart or renders it unusable. Owners generally purchase insurance to cover the property itself and to protect their investment in the property, but this insurance does not cover the renter under normal circumstances. In the event of a disaster, if the tenant does not have renter’s insurance, the tenant risks losing any and all possessions or investments in the rental property. Some leases may actually require the renter to obtain renter’s insurance, especially if the property is located in an area prone to natural disasters, such as near the coast where hurricanes or typhoons frequently strike.
Leases are typically referred to as a contract between an owner and a lessee. This effectively transfers conditional ownership of a property from the lessor to the lessee for a specified period of time, usually called an extended lease with 99-year or 125-year terms. The coverage of the lease itself generally includes everything within the four walls of the unit, such as possessions and renovations made by the tenant. As such, renter’s insurance is meant to cover this specific term along with possessions and investments within the four walls of the property. Owners will generally cover the exterior of the building and the common area with their own policy.
Typical leases are apartments, dwelling units, shops, or units located above commercial or retail space. Although a tenant has great flexibility with the unit, he or she is still under contract to the owner and has to abide by the terms of the lease. One of those terms is for the tenant to obtain renter’s insurance, often required by the landlord to protect their interests in addition to the interests of the tenant.
Under such requirements, the renter is normally required to obtain a policy from an insurer designated or approved by the owner. The authorized insurer must be the lessee of a renter’s insurance policy, while the policy must cover both the interests of the renter and the owner. Coverage must be for the entire term of the lease and must cover all potential risks to the unit. Failure to secure and maintain rental insurance violates the lease in such circumstances and may result in the loss of the tenant’s rights to the property. Courts generally serve as the final judge in such matters, although the lease is often considered the primary source of evidence for such rulings, aside from extenuating circumstances directly caused by the landlord.
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