A Renters Insurance Addendum is a legal contract incorporated into a Lease Agreement between a landlord and their tenant in which the tenant agrees to maintain a current renters insurance policy throughout the lease term and acknowledges that the landlord will not be responsible for any loss of personal property or liability claims due to the tenant’s negligence.
Why Use a Renters Insurance Addendum?
Whenever a landlord is renting a property to a new tenant, they must make sure that all aspects of the tenancy are addressed. This includes situations where a tenant may suffer a loss of personal property or is sued for something that happened at their rental property. A Renters Insurance Addendum helps address these concerns.
Here are some specific reasons why a landlord should require all tenants to sign this type of addendum as part of a new lease agreement:
- Landlord’s Insurance – While a landlord is likely to have a separate property and liability insurance policy, it will not extend to a tenant’s personal liability or property loss in most situations.
- Specifies Responsibility and Liability – Whether it is the loss of expensive personal property or a costly lawsuit, the landlord needs to make clear to the tenant that having coverage for these situations is the responsibility of the tenant. The addendum will specify that the tenant is responsible for having insurance to cover the loss of the tenant’s property or for any personal liability claims made against them.
- Reduces the Chance of Disputes or Lawsuits – Since this type of addendum takes away the uncertainty of who is responsible, there is less likely to be a dispute between the landlord and tenant if, for instance, a tenant has a valuable item of personal property that becomes damaged or lost. The tenant either has renters insurance to pay for the loss or will bear the cost of the loss.
- Protects the Tenant – While this addendum protects the landlord it benefits the tenant as well. By requiring insurance, this addendum can protect the tenant from suffering a financial loss or losing the use of items they cannot afford to replace. The insurance premium that a tenant pays is well worth the valuable protection it provides the tenant.
A Renters Insurance Addendum is for the property and personal liability of a tenant. A tenant’s renters insurance policy does not limit the landlord’s liability for their negligence. It is important for landlords to have their own separate policy to protect themselves and their business.
What to Include in a Renters Insurance Addendum
A Renters Insurance Addendum is signed at the beginning of a lease term. This addendum is incorporated into the original lease agreement and should include the following:
- Type of Addendum – The heading and opening should state that this is a Renters Insurance Addendum.
- The date the addendum is being signed and goes into effect
- Landlord’s name
- Landlord’s business address
- The date of the original lease agreement
- Tenant’s name
- Tenant’s rental property address
- Introductory information about the addendum and the original lease agreement it is incorporating
- Acknowledgment – This section informs the tenant that the landlord is not responsible for any loss of personal property or for the tenant’s personal liability
- Renters Insurance Policy – This section requires the tenant to have a renters insurance policy for any personal property loss or liability claims. In this section, a landlord may also specify the minimum coverage amount required for the policy
- Entirety of the Lease Term – This section is an acknowledgment by the tenant that they agree to the requirements of this addendum for the entire lease term and any extensions or renewals. These requirements remain in effect even if the tenant becomes a holdover tenant
- Termination or Modification – This section gives the terms upon which this addendum will or can be terminated or modified
- Subrogation – This section notifies the tenant that the landlord’s insurance company has the right to sue the tenant for any payments they made to the landlord due to the tenant’s negligence
- Indemnification – For this section, the tenant explicitly agrees to be responsible for any costs or damages, including any potential lawsuits, that are the result of the tenant’s actions or any other individuals living at the property and their guests
- Violations – This section indicates that a violation of the addendum is the same as a violation of the lease agreement and is subject to the same potential consequences
- Governing Law – The law of the lease agreement will also apply to this addendum
- Landlord’s signature and date
- Tenant’s signature and date
Our template provides landlords with the standard elements used for this addendum. However, there are certain aspects of this addendum that a landlord may want or need to change. Those include.
- Separate Insurance Riders – The location and type of rental property may require the addendum to have more specific insurance requirements. This might include requiring a separate rider for insurance covering floods or earthquakes.
- Additional Rent – A landlord can impose a specific penalty if a tenant does not obtain renters insurance or it has lapsed. A landlord can charge an additional fee on the tenant’s rent for any month in which they do not have the required insurance outlined in the addendum.
Just like with the original lease agreement, all parties should have a signed copy of this addendum. The addendum is now part of the original lease agreement and should be kept with it. If a tenant refuses to sign this addendum with the original lease agreement a landlord can deny renting to them.
What are the Risks of Not Having Renters Insurance?
There are some significant risks for tenants that decide not to have a renters insurance policy. Those include:
- Financial Liability and Bankruptcy – Lawsuits are expensive. If a tenant becomes subject to a lawsuit during their tenancy, insurance can be a lifesaver. Without it, a tenant may suffer a significant financial setback and, if the damages are large enough, it may lead to a tenant having to file for bankruptcy. This can impact a tenant’s ability to obtain credit or be approved as a tenant in the future.
- Loss of Personal Property – Without a renters insurance policy, there is no protection for a tenant if their personal property becomes lost or damaged. If an expensive or important item is lost, the tenant’s only options are to pay out-of-pocket to replace the item or simply not have the item replaced.
- Eviction – If a tenant signs a Renters Insurance Addendum, the landlord has the right to check for proof that the policy is in effect at any time. If a landlord requests proof of insurance and a tenant does not have a current policy, they have violated the lease agreement which can potentially lead to a termination of the tenancy.
- Strained Relationships – If a tenant has a guest at the property and they lose a personal item or get injured, a renters insurance policy may be used to compensate them for that loss. If a tenant does not have a policy it can cause a strain on the relationship as the guest seeks a way to recover their loss or damages.
