By Mark Cloyd, June 1, 2016 at 3:00 AM, as seen in Central Penn Business Journal

When using a property as a rental, it is critical to protect your investment.

You may believe that the homeowners’ and landlord insurance policies will protect against any damage caused by a tenant or any loss the tenant may experience. That isn’t the case.

While it is impossible to protect against everything, requiring renters’ insurance is one of the best ways to mitigate risk. If renters’ insurance is not in place, both the landlord and tenant may incur the cost of repairing damages out of their own pockets.

If you have financed a portion of your new home and intend to rent it out, your lender will require you to obtain homeowners and dwelling fire (landlord) insurance in an amount adequate to protect its investment.

Renters’ insurance generally covers a tenant’s personal belongings in the event of fire or theft. In some cases, it will allow your tenant to recover the value of personal property lost.

It may also provide liability protection for your tenants should they act in a negligent manner and cause damage to your residence, property or the community around them. Without sufficient renters insurance in place, your tenant may be responsible to pay for such damages.

Landlords sometimes hesitate to require tenants obtain renters’ insurance in an effort to keep their tenants’ expenses at a minimum; however, renters’ insurance is very affordable and may cost as little as $20 a month.

A landlord deciding whether to require renters’ insurance should evaluate the potential liability both parties are taking on by not having such insurance.

A tenant may find that paying a relatively low monthly cost is preferable to paying the full replacement cost of their personal belongings or the costs incurred with a liability loss.

“Landlords requiring renters’ insurance are doing their tenants a favor,” said Mark Henry, an insurance producer with Central Pennsylvania-based HomeSale Insurance Services. “The tenant has protection for their personal property but, more importantly, they have personal liability to protect them in the event of a lawsuit due to potential neglect.”

Mark Cloyd is vice president of business development for American Heritage Property Management, based in East Hempfield Township, Lancaster County.