'Should I Make Renters Insurance Mandatory for Detroit Investments?'

Updated November 14, 2022.

Legal Note: This article is not a substitute for legal counsel. If you need direct assistance for your Detroit investments, reach out to the Own It Detroit professionals for a rapid response!

Protecting your Detroit investment properties is a critical part of success as a real estate investor in Detroit. You probably know that routine maintenance and property inspections help reduce rental property maintenance costs and help you keep an eye on how renters care for your properties. The right types of investing insurance also help reduce the risk to your income when things go wrong. 

What more can investors do to protect their investments in Detroit? Holding residents responsible for insurance coverage is another way to protect yourself from liabilities or property reimbursement claims if something goes wrong in your property and impacts your renters.

Can investors require renters insurance in Michigan? If you own multiple properties and plan to build a significant portfolio, it's a good idea. Here's why.

You Can (and Should) Require It

In Michigan, the law does not require renters to have renters insurance. That leaves the decision up to renters whether they protect their personal property with an insurance policy or not—unless you require it to qualify for any of your Detroit investments. 

When renters don't cover themselves with an active renters insurance policy, your income is at risk if something goes wrong during their lease term. Michigan rental property owners can legally require residents to maintain an active renters insurance policy—and it's something you should consider when building a real estate portfolio with investments in Detroit.

What Happens Without Renters Insurance? 

You have your own insurance coverage, so is your investment income safe from a renter's property damage claims? Technically, the answer is probably 'yes.' However, that doesn't mean your renter won't try to seek compensation for damages if something happens to their belongings while living in your rental. 

If an act of nature causes rental property damage, your insurance covers property repairs and lost income while repairs take place. However, your policy doesn't cover any reimbursement for your Detroit renters to replace their damaged personal property.

• Without renters insurance, your residents won't receive compensation for the property damage that was out of your control. 

• With renters insurance, your residents work directly with their policyholder to receive reimbursement for their damaged items. 

As long as you are not at fault for damage to a renter's property, renters insurance saves the day for your residents and keeps them from pursuing a claim against you. However, when investors don't require renters insurance for their Detroit investments, residents could try to make a claim—or refuse to pay the rent—until you pay them for their losses.

• Imagine that happening after a storm takes out several of your single-family homes or an entire multi-family property in your portfolio.

• Requiring renters insurance helps you focus on taking care of renters and repairing your properties rather than fighting with residents about compensation for personal property loss. 

It Doesn't Cost You Anything

When handled within the legal criteria required for living in your rentals, making renters insurance mandatory doesn't cost anything for real estate investors. However, there's a more significant risk to your rental income and properties if you choose not to require this insurance before allowing a new resident to move into your Detroit investment properties.

• Even if you never have to pay a renter for damage to their personal property after a problem in one of your Detroit investments, the legal process to work through a lawsuit can be expensive.

• You might also lose that renter and face vacancy after winning a lawsuit brought on by an unhappy renter who lost their personal property. 

It's Affordable for Detroit Renters

High-quality renters know that renters insurance is a good idea. When you professionally market your properties to attract the best renters, they understand the small cost of a renters insurance policy is the best way to protect their personal belongings while in your rental property.

Potential renters who don't see the value of renters insurance—or refuse to get coverage—are probably not the best residents to live in your Detroit investment properties. However, it's important not to discriminate based on a mandatory renters insurance policy when choosing a new resident or considering a lease renewal with a current renter. 

To enforce mandatory renters insurance:

• Make it a clear part of the criteria to qualify for your renters when advertising a property

• Confirm an active policy as part of your screening process

• Request confirmation of an ongoing policy with current residents before finalizing a renewal

• Consult your attorney to make sure your renters insurance requirement and enforcement follow the law.

Requiring renters insurance is a smart policy for you and your renters. It's one more way to protect your investments and reduce your financial risks!  

Protect Your Investments With a Full-Service Investment Company

Enforcing mandatory renters insurance and protecting your Detroit investments requires a local, full-service investment company. Own It Detroit helps investors manage every aspect of the real estate investment process, including finding the best properties, choosing high-quality renters, and putting the right protections in place to minimize risks to your portfolio.

These are just some of the ways we help you invest in Detroit property. You can learn more about how to successfully grow in the Detroit area when you download your free copy of our guide to real estate investing!