How to Explain Renters Insurance to Tenants

Table of Contents

Finding a dependable renter who pays their rent on time, takes care of the property, and gets along with other tenants is harder and harder to find these days. Especially after COVID-19 hit.

Should a problem such as theft or water damage from a burst pipe occur, the last thing any landlord needs is an argument about who is at fault and, more importantly, who is going to pay for the damages. 

Small claims court is one way to proceed, but this often costs a lot of money, takes a lot of time, and creates an expensive vacancy that you will have to fill.

A better way to handle the situation is proactively: give your tenants a simple education in renters insurance or, if you have younger tenants in school or have property in a high crime area, require the tenant carry renters insurance.

There is a common misconception among renters that anything and everything in a rental property is covered by the landlord. They think that because something happened on your property (and that you must have boatloads of money), any problems that occur under your rental roof is your problem and not theirs. What needs to be explained is that the rental property is considered a private residence and that everything within is just that: private. Because it is private, it is their responsibility and not yours.

If a fire breaks out in the apartment building, who will replace the damaged property? If someone slips and falls in a tenant’s kitchen, is the landlord liable or the renter? If a tenant’s dog bites a passerby, who will pay for the medical expenses and possible court fees? To avoid any possible confusion between you and your renters, a short tutorial in renters insurance may clear up what is your responsibility and what is theirs.

Understanding Renters Insurance

renters insurance pricing

To better explain why your tenants should consider renters insurance, you’ll need to educate them about what can and cannot be covered with a policy. Renters insurance is a group of coverages which financially protect tenants from damages to property or personal items and from the liability that may arise from injuries on the premises.

Policies vary somewhat from insurer to insurer, but there are three coverages that are standard on most renters insurance companies before the add-ons begin:

1. Personal Property is everything owned by your renter which isn’t part of your physical property. This can range from furniture to electronics to jewelry and in some cases even pets. If items such as stoves, refrigerators, water heaters, etc. are owned by you but operated by your tenants, make sure these items are covered under your landlords insurance policy.

2. Personal Liability covers unintentional or accidental mishaps that occur to someone else or their belongings while in or on your renter’s property. This includes any injuries from slip and falls or even dog bites. This often, but not always, covers any medical expenses incurred because of injuries. Note that this coverage does NOT compensate the tenants themselves in the event of injury on the property.

3. Additional Living Expenses or ALE are expenses which occur when the rental space has become unlivable. Often invokes on account of fire or flooding, this coverage reimburses tenants for hotel or other alternate housing expenses when they need to relocate for a short time. This is frequently a disputed issue between landlords and tenants.

Renters Insurance Add-ons: Riders, Endorsements, and Floaters

Riders, endorsements, and floaters are the many nuances that can be added onto a policy to cover specific situations. Of course these additions come at a price, but savvy renters who ask about pay for these specialty coverages will come out ahead in the event of a disaster. 

Riders or endorsements are add-ons which cover a slightly wider spectrum of personal belongings. For instance, a renter might have $10,000 worth of electronics, but the insurance company’s base policy may only cover $2,000 in electronics. In this case, it is suggested the tenant buy additional protection to cover the remaining items through a rider or endorsement.

A floater covers more specific items on the rental property. Jewelry, for example, is often covered for around $1000 per household. If a tenant owns particular pieces of jewelry which are a little pricier, such as a fine engagement ring or a Rolex watch, they should consider getting a floater to cover them.

What About Flooding?

How to Explain Renters Insurance to Tenants 5

Flood insurance is usually not included in a standard insurance policy and is not even offered by many carriers.

For both tenants and landlords, the availability and cost of this coverage is dependent on location. In standard insurance policies, though, flooding is what is known as an excluded peril–which means insurers won’t pay for it. 

For example, say your rental property roof was compromised due to heavy winds and a storm followed shortly afterwards, flooding an upstairs apartment. Under some exclusions, insurance companies will argue that the flooding (rather than the high winds) caused the damage, making flooding the excluded peril and leaving you and your tenants out of luck.

As an alternative, the US government formed the National Flood Insurance Plan (NFIP), which you may want to offer your tenants if your property is in a high risk flood area.

However, flooding is different from water damage in that flooding is caused by natural elements (hurricane, storm, heavy spring thaw, etc.). A water damage add-on often covers problems like a burst pipe or other severe plumbing issues. Per usual, each plan is different and must be discussed with your insurance agent. 

So… What is Covered?

While each insurance company is different, the items below are considered “common perils” which are covered by most of the renters insurance policies:

How to Explain Renters Insurance to Tenants 6
  • Windstorm or hail
  • Theft
  • Smoke
  • Fire or lightning
  • Explosion
  • Vehicles
  • Weight of Ice, Snow, or Sleet
  • Riot or civil commotion
  • Accidental discharge or overflow of water or steam
  • Aircraft
  • Vandalism or malicious mischief
  • Volcanic eruption
  • Falling object
  • Sudden & accidental tearing, cracking, burning or building
  • Freezing
  • Sudden & accidental damage from artificially generated electrical current

It cannot be stressed enough that anyone considering renters insurance should specifically question their agent on every one of the above coverages and scrutinize their contract prior to signing. As with every insurance plan, it is up to the insured to make sure they are covered.

A Look at 11 Popular Home Rental Insurance Companies

Renters Insurance Company (no particular order) Pros Cons Average Price Point* J.D. Power Rating
1. Lemonade User-friendly online system, affordability Only available in 20 states. Starts at $5/month* N/A
2. Progressive Online competitive price shopping When filing a claim, you may have to go through your third-party underwriter rather than report directly through Progressive Starts at $13/month* 3/5
3. Amica Customizable insurance coverage Standard coverage doesn’t typically cover much Starts at $4/week* 5/5
4. State Farm Availability in every U.S. State Limited home policy deductibles Starts at $12/month* 4/5
5. Liberty Mutual Plenty of options for discounts & savings, great mobile app Relatively low satisfaction ratings, tough to find local agents Starts at $12/month* 2/5
6. Erie Outstanding customer satisfaction Lack of a mobile app to manage the policy Starts at $15/month* 3/5
7. Metlife Availability to insure expensive luxury items that wouldn’t normally be covered under your policy Not many money-saving opportunities Starts at $10/month* N/A
8. Allstate Claim-free policy discounts Mid-low satisfaction rating Starts at $15/month* 2/5
9. USAA Multiple policy discounts, replacement cost coverage (no depreciated valuations) Only available for U.S. Military Service Members, Veterans & their families Starts at $10/month* 5/5
10. Travelers Many coverage & prices options Mid-low satisfaction rating Starts at $17/month* 2/5
11. American Family Wide range of discounts Not available in every state N/A 5/5
*prices are general guidelines based on research and may not reflect each company’s exact pricing on any given day as prices also vary dependent upon a large variety of factors.

Renters Insurance: The Takeaway 

A short education on renters insurance will benefit both you and your tenants if a problem arises. Fires, natural disasters, water damage, and other calamities are costly and create stress for both landlords and tenants. Offering solutions before these problems arise will protect everyone involved and keep your renters happy. If you have a website, provide your tenants with resources so they can educate themselves. Also provide them with reading materials when signing their lease or possibly in a monthly newsletter. Any way to openly communicate their responsibilities and yours will end in a more harmonious landlord/tenant relationship.

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Your portal includes a selection of extremely useful reports. Reports are available in the “Reports” section, and are distinct from the financial statements. Unlike financial statements which are static records, Reports are dynamic real-time records that will update with current data every time you view them. 

Scroll down to learn more about Reports:

Navigate to the "Reports" module in your portal:

  • Keep in mind, these reports are dynamic records. They will refresh to display current information every time you view them. 

Enhanced Rent Roll Report:

  • The Enhanced Rent Roll Report will show the rent amount, last payment date, move-in date, lease expiration date, and security deposit amount for each of your tenants. 
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Unit Comparison Report:

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Income Statement Month-Over-Month:

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Financial Statements

Financial statements will be published to your portal on a monthly basis. The statements are found in your Documents library, and provide a historical record of all financial performance. The statements serve as a snapshot of financial performance over a given period, and are static documents (unlike Reports, the statements do not update/change in real-time). 

Scroll down for more info about the Financial Statements in your Documents library:

The Documents area contains monthly financial statements:

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Download a statement to see month and YTD financials:

You'll also find a month-over-month operating statement:

Portal Communication Tool

You can use your owner portal to communicate with our team. Any messages you send through the portal will go straight to your Account Manager. When we reply, you’ll get an email notification and you’ll also see the message in your portal next time you log in. 

Here’s an overview of using the communication platform:

Click "Communications" and navigate to "Conversations":

  • The communications module will contain a record of all messages that you create through the portal. 

Click the "New Message" button and send your message:

Responses will show up in the conversation ticket:

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You can reply in-line using the comment box:

Each conversation will be logged in its entirety:

Understanding the Ledger

Your portal includes a ledger with all transactions. The ledger is populated with data in real-time as transactions flow through our accounting software. Much of this information is also available in the Reports area, as well as the Statements in your Documents library, but the ledger is the most comprehensive resource for diving into the details. 

Please scroll through the sections below to get a better understanding of how to interpret the ledger. 

By default, transactions are sorted chronologically:

  • The date reflected in the lefthand column is the actual transaction date, not the “bill date”. This is the date the transaction was actually processed. 

If you have multiple properties with Nomadic, you'll see the address for each transaction in the "Location" column:

  • You can filter the ledger to look at just one property, all properties, or specific sets of properties. 
  • If you only have one property with us, you’ll just see the ledger for that property. 

The Description column displays the transaction type:

  • BILL: this is an expense transaction, such as for repair costs or management fees.
  • CHARGE: this is a transaction  billed to the tenant, most typically a rent payment. 
  • NACHA EXPORT: this is a credit we processed to your distribution account. This type of transaction is how you get paid! 

The Amount column shows the dollar value of each transaction:

  • Positive Amounts: if an amount is positive, it reflects a transaction that is payable to you. Typically, this will be a rent payment that we collected from your tenants. On occasion, a positive number could also signify a journal entry or credit adjustment. 
  • Negative Amounts:  if an amount is negative, this is a transaction that is either payable to Nomadic or is an amount that has already been paid to you. Typically this will be for repair costs or management/leasing fees. Owner draws (net distributions into your checking/savings account) also reflect as negative amounts, since they have already been paid to you. 

The Account Balance column shows a sum of positive/negative transactions at a given point in time:

  • Account Balance should always equal zero after a net distribution has been processed. When the balance is zero, this means that all expenses have been paid and you’ve received the remainder as net operating income, leaving a balance of zero (meaning: no one is due any money, as all funds have been distributed appropriately). 

Navigating the Propertyware Owner Portal

Your portal includes some extremely useful features that help you understand your property’s financial performance at a new level, with real-time transparency into every transaction.

Scroll through the snapshots below for an overview of portal navigation! If you need more help or have specific questions about using the portal, you can reach out to your Account Manager any time for a screen share. 

You can filter all info by date range or property:

View a snapshot of income and expenses on your dashboard:

See every transaction in real-time on your ledger:

Statements and forms will be posted to your documents library:

View a suite of real-time financial reports:

See a running list of all bills, and drill down for more detail:

Under Bill Details, you'll find dates/descriptions/amounts and more:

You can also communicate with your Account Manager through the portal:

How do net distributions work?

Net distributions keep your accounting clean and simple. Each month we’ll collect rent from the tenants, deduct any repair expenses for the previous month and any management/leasing fees for the current month, and credit the remaining net operating income to your account. 

You’ll receive a statement via email each time a net distribution is processed, and can view all transaction details in your Propertyware owner portal.