Renting out your property can sometimes be an expensive endeavor, especially when it comes to accidental damage. I want to share a story with you about an AppFolio customer who was recently reminded of how tenant liability insurance can save their bottom line. In talking with this customer, I learned that one of his tenants left a pan unattended in the kitchen and the grease sitting in the pan caught fire. The tenant did his best to put the fire out, but the Fire Department also responded. Once everyone was confident that the fire was out, the property owner started surveying damage, which extended not only to the unit the tenant lived in, but also to the hallway leading to other units. All in all, with fire and smoke damage, the repairs were going to cost over $45,000.
Luckily, the property owner/manager has recently added an insurance requirement to their lease and the tenant had liability insurance. In the past, the property manager would have had to cover a $5K deductible and put in a claim on their building policy, resulting in rate increases. But because the renter was insured, all the damage was covered by the renter’s insurance and this owner was saved from both $5K out-of-pocket as well as resulting rate increases.
Looking to improve your bottom line in 2016? Considered adding a liability insurance requirement to your lease. But why?
Because Accidents Happen
Accidental damage is inevitable, but making sure your property is protected is a choice. With an insurance requirement in your lease, you can rest knowing that the property is always covered.
It Can Decrease Your Costs
A claim on your property insurance can be expensive. Between the deductible and out-of-pocket repair expenses, you may be out much more than what a tenant security deposit can cover. On top of that, your premiums may increase due to the incident. If this was to instead be filed on your tenant’s policy, you would not need to worry about your rates being affected.
There Are Tenant Benefits, Too!
Requiring residents to carry insurance can also benefit the resident. Most renters insurance policies cover the renter’s personal belongings, in the event that they are damaged during incident, as well as can cover the living expenses should a renter need to be temporarily housed while repairs are taking place. Not only does requiring insurance benefit you as the owner, the tenant has some protection for his or her own property as well.
Your property is your investment, and protecting that investment is a priority. Consider passing some of that responsibility to your tenant and implement an insurance requirement in your leases today.
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