Insist On Tenant's Insurance Coverage

Very often, when landlords rent out their properties, they overlook the importance of having their tenants take up insurance. While the insurance clause exists in most tenancy agreements, most landlords do not enforce this covenant on their tenants.

Is Insurance Coverage Really Necessary?

Many landlords do not understand the importance of their tenants having insurance coverage. If you think that your tenant's insurance covers only your tenant's business and property, you are wrong.

There must be a reason why, on your tenancy agreement, your tenant is required to have insurance coverage. Your tenant's insurance doesn't only cover their business risks and assets. It also the premises that they operate their business in, which, in this case, is your property.

Do you know how much of your tenant's security deposit do you hold? Is your tenant an SME or an MNC? In the event when your tenant damages your property, do you think the security deposit is enough to cover the repair cost? This is where your tenant's insurance comes in handy and why it is so important to you as a landlord.

For starters, the tenant's insurance allows them to claim against their insurer for damages that they are not willing to pay for. It also allows you to claim against them directly should they decide to go wayward. For instance, they damage your property and refuse to cooperate with you and compensate you.

This is why it is so important for you to have a proper insurance covenant on your tenancy agreements. So make sure every tenant takes up insurance coverage.

How to Enforce Insurance Coverage

Another way to enforce insurance coverage on your tenant is by asking them to produce proof of insurance coverage upon their signing of your tenancy agreement. Do note that your tenant can only insure your premises after the tenancy agreement is duly signed by both parties and stamped with IRAS. Therefore, you should allow some grace period for your tenant to get their insurance sorted out. As a rule of thumb, give your tenant 30 days to get their insurance in order. However, be ready to exercise flexibility should your tenant encounter complications and need longer time to have their insurance take effect.

Finally, you should also be aware that your tenant's insurance covers them for 1 year only. Thus, you must also make it a point to request for their valid insurance renewal document every year. This will ensure your property is insured throughout their lease.