In these times where everyone is trying to cut cost and live less expensively one of the most overlooked items in a renter’s budget is Renters Insurance. With most policies costing less than $20 per month renters insurance is one of the most cost effective and inexpensive types of policies in the marketplace. As landlords we spend a lot of time and money to do landlord credit checks, background checks to screen tenants to find a responsible tenant, tenant that has renter’s insurance to protect his valuables is a good indication he will protect your valuables also.
Do All Landlords Require Renters Insurance
Although all landlords should have property insurance for their rental properties it is the responsibility of the tenant to get renters insurance and is up to each landlord to determine if they require it from their tenants. Some landlords require Renters Insurance as part of their lease agreement and potential tenants might be turned off because it increases their rent and it looks in essence to be a higher rent and may look for a less expensive apartment.
Why Don’t Tenants Get Renters Insurance
Many times a tenant doesn’t want to pay the additional expense of a rental insurance policy not realizing how inexpensive it is. Sometimes a tenant doesn’t realize that their personal belongings are at risk and assume that they are under the landlords insurance if there is damage to the unit due to fire, theft or personal injury. Many times tenants undervalue their personal belongings and don’t realize how expensive it would cost to replace them, but the majority of people don’t think anything will happen to them and don’t buy insurance.
Why Every Tenant Should Have a Renters Insurance Policy
There are plenty of great reasons to have a renter’s insurance policy and the number one reason is that it makes sense and it is cheap. For a tenant for few dollars a month you can protect your belongings from fire, theft or damage. For a landlord it adds more insurance coverage for the unit and it can lower his landlord insurance premiums that he has to have for the unit. It also shows that a tenant values their personal belongings and if they are responsible enough to get a policy on their personal items there is a better chance that they will treat the apartment with more care.
How To Make It A Win – Win Solution For Everyone
As a landlord you should require all tenants to carry renters insurance but you can do a few things to your units at a low cost and help get lower premiums for a policy and make it a win-win situation for both of you.
Most insurance companies will give renters a break on the premiums if the unit has fire extinguishers, deadbolt locks on exterior doors, or have a sprinkler system in occupied areas.
If you are looking at a long term rental you might want to talk with a tenant and discuss installing a security system. You can pay for the installation and they would pay for the monthly monitoring. Most security companies provide free installation with a 2-3 year contract. If the tenant is paying the monthly charge you have essentially installed a security system at no charge.
If a potential tenant comes in and already has a policy and you don’t require it why not look at giving them a discount on their rent. They put a premium on their belongings and want to take care of their items and hopefully they treat your unit with care and be that good tenant that you are looking for.
A landlord credit check is one of many tools used by landlords in order to gauge the amount of as well as the type of risk a potential tenant is.
The idea is that that past credit related issues is a good indicator to determine the likelihood of a tenant defaulting or paying the rent on time and in full. To some extent this is true and running a credit check is one of the best ways to find a good tenant but you need to understand what a landlord credit check entails and use it properly.
Should you use the landlord credit check as you sole for selecting a tenant?
A popular myth perpetuated by so called “experts” is that a landlord can run a credit check and use it as the sole basis for his or her decision. Therefore, an applicant tenant who has a very bad credit report is sure to get a denial. This is absolutely false.
The truth of the matter is that a landlord can run a credit check and will use the credit report as a basis for his or her decision. However it is still the discretion of the landlord to deny or approve the application.
A tenant who has a low credit score or a bad credit report can increase the chances of approval by admitting this outright and if he or she has sufficient capital, just tell the landlord that he or she is willing to pay an increased rent to offset the risk or is willing to pay additional deposit as well as advanced deposits. Assuring the landlord that you are more than willing to give postdated checks outright at the contract signing is also a good idea.
There are many reasons for a low credit score and if the prospective tenant it honest and has some valid reasons you should take the time and listen. Many times a tenant that has bad credit for reasons beyond their control make great tenants since they want to get back on their feet and realize that paying on time is one of the best ways to increase their credit scores.
Will Running A Credit Check Hurt Your Credit Score?
Another popular myth is that a tenant applicant should not give authorization for the landlord to run a credit check because the more credit inquiries are made over a short span of time the lower the credit score will get. Taking into consideration the fact that a tenant will shop around with several landlords means that the tenant applicant is left with dozens of landlord credit checks which will definitely lower the credit rating. This is absolutely false.
The truth of the matter is that landlord credit checks seldom affect a person’s credit score. The reality is that a credit report with a lot of credit inquiries put a third party on the alert and can even cause a slight drop in the credit score.
However this is only true in case of hard inquiries. A credit inquiry by a landlord is considered a soft inquiry regardless of the number of inquiries provided it was made over the span of a few weeks. All inquiries will be considered as a single soft inquiry and by law cannot affect the credit score
The reason is because the law recognizes the right of a tenant applicant to shop around for the best deal possible and this means going to dozens or even hundreds of tenants to request a quote.
What if a tenant still doesn’t want you to run a credit report?
If a tenant is still leery about having a credit report run on them they can make things easier by bringing his or her free annual credit reports when talking with a landlord. Just make sure that the same is not older than six months. And it would be wise to bring the top three credit reports from Experian, TransUnion and Equifax, which hold greater weight with landlords.
A landlord credit check is one of the best ways to screen a tenant and both the landlord and tenant should be aware of the need for a good credit score. But the truth of the matter is that is it just one of the tools a landlord can use to find a good tenant.