Sometimes, life happens, and your tenant must move out before their lease is up. In these situations, tenants often recruit a subtenant to take over the remainder of their lease. While this arrangement can benefit everyone involved, it also raises important questions about renters insurance, landlord responsibility, and tenant rights.
In this article, we’ll discuss the interplay between renters insurance and subletting and offer tips for protecting your rental business. Here’s an overview of what we’ll cover:
- Subletting vs subleasing: key differences
- Subletting and insurance requirements: what to know
- How to verify subletter insurance coverage
- How to encourage renters to get insurance
Understanding Subletting and Insurance Responsibilities
Before we get into insurance logistics, let’s discuss subletting as a whole. Subletting occurs when a subtenant leases a rental property from an existing tenant. For instance, say your tenant unexpectedly relocates for their job with several months left on their lease. If their lease permits, they can recruit a new tenant, called a subtenant, to take over the remainder of their lease.
Subletting vs. subleasing
Subletting and subleasing are often used interchangeably. However, they are not the same. Subletting involves drafting a new lease agreement between the landlord and the subtenant. Subleasing, on the other hand, is strictly between the original tenant and subtenant.
If your tenant subleases the property, they are still responsible for paying rent for the remainder of the lease. To do so, they’ll receive money from their subtenant, which will then go to you. With subletting, the original tenant is completely removed from the equation, meaning your subtenant will pay rent directly. The latter situation is typically preferred, as it eliminates the need for a middleman and minimizes miscommunication or liability disputes.
Where renters insurance comes into play
If you’re like most landlords, you probably require tenants to have renters insurance. This not only protects your tenants’ belongings and liability, but it also protects you in case of any damage or accidents caused by the tenant. But what happens if your tenant decides to sublet? Will the new tenant retain their insurance coverage? As you’ll soon find out in the next section, the answer is usually no. However, that doesn’t mean your liability is at stake.
Are Subletters Covered Under the Original Tenant’s Renters Insurance?
The short answer is, no. Subletters are not covered by the original tenant’s renter's insurance policy. This means that they must purchase their own insurance coverage before taking over the lease. Otherwise, their personal property and liability will not be protected should an accident happen like a break-in or on-site injury.
How to enforce renters insurance requirements for subletters
Enforcing renters insurance requirements looks the same for both tenants and subtenants. The main point of action is always to include a renters insurance clause in the lease agreement. This clause should detail everything your tenant/subtenant must know about their coverage obligations, including mandatory coverage and the consequences of not having it.
Here is an example of what a renters insurance clause might look like:
The tenant agrees to obtain and maintain renters insurance for the duration of the lease. The policy must include a minimum of $100,000 in liability coverage. Proof of insurance is required prior to move-in and must be provided upon request throughout the lease term. Failure to comply may result in termination of the lease. The landlord reserves the right to request updated proof of insurance at any time during the lease period.
Just like you’d include this clause in an original lease agreement, you’d also include one in a subtenant’s contract. This is a good example of how subletting can be more beneficial than subleasing, as contractually onboarding the subtenant ensures they adhere to your specific rules, including insurance requirements.
How to Verify Subletter Renters Insurance Coverage
Enforcing renters insurance requirements is one thing. Verifying coverage is another. Once your subtenant signs on the dotted line, how can you be sure they’re getting the necessary coverage? Well, the simplest way is to ask for proof.
Asking for proof of renters insurance is commonplace for landlords. Before moving in and officially taking over the lease, require your subtenant to provide at least one of the following:
- Renters insurance declarations page
- Renters insurance policy document
- Contact information for their insurance agent
- Their policy number and insurance provider
Receiving any of the above materials should adequately verify your subtenants' coverage. Ask for some sort of proof of insurance during the lease signing. If the subtenant is taking over a longer lease, say one with more than six months left, you might ask them to verify their insurance again later in the term. This is a good preventative measure, seeing as policies can be cancelled or expire during the lease term.
Encouraging Compliance Without Risking Tenant Turnover
It’s important to consider how you address insurance requirements with a subtenant. Rather than using commanding or aggressive tactics, it’s better to frame renters insurance in a way that highlights its mutual benefits. Because insurance isn’t legally required, tenants might first show apprehension toward getting a policy. However, with the tactics below, you can encourage subtenants to get coverage with minimal pushback.
Explain the benefits
If tenants aren’t familiar with renters insurance, make sure to educate them on its benefits. Highlight how it protects their personal belongings in case of theft or damage. Also, you should mention how it provides valuable liability coverage in case someone is injured on the property. By emphasizing these benefits, subtenants may see more value in getting renters insurance and be more likely to comply.
Offer assistance in securing coverage
To help subtenants secure insurance, you might provide them with helpful resources like insurance provider recommendations or informational pamphlets. Anything you can do to make the process easier will encourage them to get the necessary coverage. This shows that you care about their well-being and renting experience, kickstarting a positive landlord-tenant relationship, even if it’s only for half a lease term.
Provide reminders and follow-ups
Another way to ensure insurance compliance is to provide reminders and follow-ups. This is especially important if your subtenant decides they want to renew for another lease term. In this case, politely remind your tenant that their renters insurance coverage must be renewed annually. Because they’ve come as a sublet, this means their time for insurance renewal might occur mid-lease, rather than aligning with the beginning/end of the term. Make sure they’re aware that their policy must be renewed and provide them ample time to do so.
Learn More About Renters Insurance with Apartments.com
Renters insurance is a small but significant investment that benefits both tenants and landlords, especially when subletting. Requiring insurance in your lease agreement from the get-go ensures that you, your tenants, and your property stay protected. If you want to learn more about renters insurance and its role in the rental process, visit our Resource Center for helpful articles, guides, and tools to make the most informed decisions for your rental business.
This article is for informational purposes only. Insurance requirements and regulations vary widely by location and individual circumstances. Before making any decisions regarding insurance, consult with a licensed insurance agent familiar with your specific situation and your local laws.
FAQs
Is renters insurance mandatory for tenants?
Renters insurance is typically not mandatory by law, but landlords may require it as part of the lease agreement. It helps protect tenants from unexpected costs due to damage, theft, or liability claims.
Can a landlord require renters insurance for subtenants?
Yes, a landlord can require subtenants to have renters insurance if it is stated in the original lease or sublease agreement. This ensures the property is adequately protected and that the subtenant has coverage for personal belongings or liability.
What happens if a tenant subleases without permission?
If a tenant subleases without permission, they may be in violation of their lease agreement. This could lead to eviction, fines, or other legal consequences depending on the terms of the lease.
Does a subletter need renters insurance?
Yes, subletters should have renters insurance to protect their belongings and cover liability risks. However, the original tenant’s policy typically won’t cover the subletter, so they’ll need their own separate policy.
