There are many misconceptions about Renter insurance ranging from the price being too high, to the coverage being an unnecessary expense, to the mistaken belief that you are covered under someone else’s policy.  The truth is Renter insurance is as important as Auto insurance, can be as cheap as $75, and if your name isn’t on the policy, you’re not covered.  For these reasons landlords are beginning to mandate Renter insurance be purchased before new tenants can start a lease.

I had Eric Narcisco, Managing Director of www.EffectiveCoverage.com, America’s premier Renter Policy purchasing portal; write a brief article on the growing trend of Property Owner’s requiring Tenants to hold Renter Policies:

Research from the Independent Insurance Agents & Brokers of America (IIABA)found that 64.4 percent of people living in the country’s 35 million rental properties insurance do not carry.  This translates into increased operating costs for landlords as they find themselves losing money in the event of a tenant’s loss. Money is spent unnecessarily as the owner funds property deductibles, struggles to re-occupy the vacant units, and pays excessive legal fees. In an effort to protect themselves from these disruptions, more property owners are requiring residents to carry insurance.

The Details

Legal precedent has shown that landlords have the right to require residents to carry a prudent amount of liability insurance. The limit that most owners prefer is between $50,000 and $300,000 worth of coverage. In satisfying liability requirements, tenants also frequently purchase personal property insurance because it can easily be added to a liability policy. The result is an adequately insured tenant who is positioned to maintain financial stability, even after a significant loss.

Who is doing it?

Legal support for requiring insurance has been around for years, but the practice is finally picking up momentum as some of the largest multifamily companies in the country require their tenants to carry insurance. According to a recent Apartments.com survey, 20 percent of renters state that they are required to have a renters insurance policy in order to maintain residence at their current apartments. The survey results also demonstrate that 36 percent of respondents are more inclined to rent from a landlord who requires renters insurance.

Adding Another Cost to Tenants

Property owners often have concerns about adding incremental costs to residents. As previously mentioned, residents are more frequently choosing to purchase coverage and pay a premium in an effort to protect themselves anyway. Policies can cost $100 annually, or $8.33 a month. The benefit of added financial protection far outweighs the small burden of a monthly premium.

Subrogation

When tenants do not carry their own insurance, owners end up funding deductibles as they make claims for tenants’ losses on their own policies. Subrogation occurs when an insurance company seeks reimbursement from the person or entity legally responsible for the loss. If a carrier is successful at recouping any amount of money, the carrier must first reimburse the landlord’s deductible before any money is retained for the carrier. The problem is that insurers often avoid subrogating against uninsured tenants since it is unlikely that they will be able to collect, which means the landlord’s deductible will not be reimbursed. However, when a tenant is backed by a $100,000 general liability policy from a reputable carrier, subrogation is often achieved and the landlord can recoup some or all of the deductible paid out of pocket.

Mr. Narcisco is one of the World’s foremost experts on Tenant coverage.  Whether you are a Renter or a Property Owner I highly recommend visiting Effective Coverage.

Enforcing Renters Insurance

One of the challenges facing property managers is how to effectively deal with the logistics of requiring renters insurance. Effective Coverage provides a solution to this dilemma through its web-based risk management tool that allows for the procurement of policies for tenants and the  capability to track the policies purchased. When considering a partnership with a resident risk management provider, it is important to consider the following:

• Competitiveness of Rates
• Carrier Rating and Claims Paying Ability
• How Effectively the Company can Track Policies Outside of its Platform
• The Ability to Interface with Property Owner’s Software

In summary, it is clear that property owners and managers benefit from tenant risk management providers. Mitigating financial loss is especially pertinent in this economy when all costs need to be carefully examined.

Disclaimer:

This article is for informational purposely only. There is no legal advice being suggested or proffered and the author assumes no responsibility or liability for the actions take or not taken by the readers based upon such information.

Thank you,

Ryan H.

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