Should NYC Landlords Require Renters Insurance? What Building Owners Need to Know

Requiring condo/co-op owners and tenants to purchase insurance protects not only their interests, but also those of the board or landlord.

For many New York City landlords, requiring tenants to carry renters insurance is an important risk-management practice. Increasingly, it may also be an underwriting issue. Depending on the insurance company and property, a building owner may be required to make tenant insurance a condition of the lease.

But NYC landlords also need to understand when they can impose that requirement, particularly in rent-stabilized apartments.

Can New York Landlords Require Renters Insurance?

Generally, landlords can make renters insurance a condition of a new lease. However, different rules apply to rent-stabilized apartments.

New York State Homes and Community Renewal (HCR) says owners of rent-stabilized apartments can require tenants to purchase renters insurance only as part of the vacancy lease. Building owners cannot add a renters insurance requirement when an existing tenant signs a renewal lease.

For that reason, owners should address renters insurance when drafting their leases rather than waiting until a problem—or an insurance requirement—arises.

Do Insurance Companies Require Landlords to Require Renters Insurance?

Sometimes.

Insurance underwriting requirements vary by company, program and individual property. At the City Building Owners Insurance Program, we’re seeing insurers place greater emphasis on tenant insurance as part of their underwriting requirements. Some carriers require building owners to mandate renters insurance and obtain proof of coverage from tenants.

That makes renters insurance more than a question of whether an owner considers it a good idea. When shopping for or renewing landlord insurance, owners should ask their insurance broker whether the carrier has specific requirements regarding tenant coverage and how those requirements should be documented.

How Do Landlords Benefit from Renters Insurance?

A landlord’s building policy and a tenant’s renters policy protect different interests.

The New York State Department of Financial Services explains that a landlord’s insurance policy does not protect a tenant’s personal property. Tenants need their own coverage for personal belongings such as furniture, clothing and electronics.

That distinction can also matter when a tenant causes damage.

For example, a cooking fire or an overflowing bathtub can damage not only the tenant’s apartment but also the building and neighboring units. When the tenant is legally responsible for the damage, liability coverage under a renters policy may help cover the loss.

Renters insurance doesn’t replace landlord insurance or eliminate the building owner’s liability. Instead, it adds another layer of protection when a loss involves the tenant’s property or actions.

What Does Renters Insurance Cover for Tenants?

Although individual policies differ, renters insurance commonly provides three important forms of protection.

• Personal property coverage can help replace belongings damaged or destroyed by covered events such as fire or theft. The landlord’s insurance generally won’t pay for a tenant’s lost furniture, electronics, clothing or other possessions.
• Personal liability coverage may respond if the tenant is legally responsible for injuring someone or damaging someone else’s property. For landlords, that protection can be particularly important when tenant negligence damages the building or another apartment.
• Additional living expense coverage can help tenants pay increased living costs if a covered loss temporarily makes their apartment uninhabitable.

These protections are primarily designed for the tenant, but they can benefit the landlord as well. When tenants carry their own property and liability coverage, both parties have insurance policies that address their respective risks.

How Should Landlords Implement a Renters Insurance Requirement?

Start by talking with your insurance broker. If your building insurer requires tenant coverage, find out whether the carrier specifies minimum liability limits, documentation requirements, or other conditions.

Next, make sure the lease addresses the insurance requirement correctly. This is especially important for rent-stabilized apartments since New York HCR does not allow an owner to introduce a renters insurance requirement in a renewal lease.

Owners should also establish a process to collect and maintain proof that required coverage is in force. A requirement buried in the lease won’t accomplish much if nobody confirms compliance.

Review Tenant Insurance Requirements at Policy Renewal

Insurance underwriting requirements continue to change, particularly in the challenging New York habitational market. A lease provision that was once simply a best practice may also affect which insurance programs are available to a property.

The professionals at the City Building Owners Insurance Program specialize in helping New York City-area landlords understand insurer requirements and identify ways to make their properties more attractive to underwriters. Request a free, no-obligation insurance review to identify potential coverage gaps and risk-management opportunities.