Most landlords, property managers and real estate professionals probably understand the value of landlord insurance. However, many communities still don’t require every resident to provide proof of renter’s insurance. Things are improving. Between 2011 and 2012, the percentage of landlords/property managers who require self-paid insurance rose almost 15 percent, from 62 to 84 percent. According to the National Multi Housing Council’s 2012 Apartment Cost Risk Survey, almost 85% of respondents claimed they stipulate coverage as a lease requirement. The number is less impressive when you consider that 4 out of 10 people who claimed they required residents to purchase coverage didn’t have a standard that covered all properties.
It wouldn’t make sense to skip your landlord insurance, or fail to renew those riders that protect you against fire, wind, floods and other “normally excluded” acts of God.
Why would you leave yourself open to losses when it isn’t necessary? Recovering losses is arduous at best. In 2013, Scott Woodward, risk manager for Dallas-based Trammell Crow Residential, told Multifamily Executive Magazine the odds are about 1:50 of collecting on a lien filed about tenancy ends.
If you’re still among the shrinking pool of property managers who don’t require renter’s insurance, here are four reasons you should rethink your plan.
Number One: Reduce Exposure
There isn’t one insurance standard that covers every state. Some cities even have rigorous rules that apply only to residents and landlords living within their borders. But, the probability is high that your landlord coverage doesn’t shield you totally from liability.
Did you know that some renter’s policies cover medical expenses if a resident and/or guest is injured on your property? Manager/owners who live on the same property as residents may think their homeowner’s policy is enough, but more often than not, you’ll need a separate policy.
Number Two: It’s “Free”
Okay, technically insurance is never free. Someone has to pay for the policy. You’ll want to explore options to help your residents find affordable cover that protects all stakeholders. Whether you add the monthly fee to your rent tiers or require residents to provide a prepaid policy, your property won’t have to assume the expense unless that is part of your business plan. Some property management firms opt to purchase coverage and pass the expense on to their residents. Others may ask their insurance agent for options that allow them to pay a portion of the coverage. Most probably choose to put the responsibility in the resident’s hands.
Number Three: Lower Your Operating Costs
Renters insurance is like every other insurance product, it’s sole purpose is to protect against emergency losses caused by accidents. There are plenty of other expenses beyond repairing the walls and replacing the appliances after a kitchen fire.
Have you considered loss of rent? If your resident has to temporarily relocate during renovations, who covers their monthly lease obligation to your property? Where will they store personal property and who pays for temporary storage. How much will legal fees cost to defend your claims or file a lien?
Renter’s insurance policies protect the owners, the property managers and the residents. Plus, it’s hard to put a price tag on the peace of mind that comes from knowing you have that extra coverage if something happens.
Number Four: Make it a Marketing Mention
If you’re actively seeking new properties, mentioning you have a company standard that requires renter’s insurance may help you tip the scales in your favor. Owners are looking for managers who know how to protect the investment and save money.
It really doesn’t make sense to continue putting off the decision to add an insurance stipulation to your lease. Have you had a negative or positive experience with renter’s insurance? Comment and share your thoughts with our readers.