This property manager’s guide to expanding your service to residents while mitigating risk explains everything you need to know about how to offer affordable renters insurance and how to get renters insurance conversations started with investors, owners, and tenants.
Use this article as a jumping off point for your next marketing campaign to attract residents interested in creating long-term relationships with management companies who value and appreciate their business.
Even if you don’t highlight apartment insurance in your marketing material, you’ll gain valuable insights into the benefits of making it easy, convenient, and affordable for residents to purchase rental insurance that protects your property assets and your community.
What is Renters Insurance?
Renters Insurance Definition: An insurance policy that primarily covers the contents of a leased dwelling. A dwelling is usually defined as a single-family home, condo, townhouse, mobile home, modular home, apartment or any building, or part of a building, with separate sleeping quarters, kitchen and bathroom. (There are also renter insurance policies for houseboats, RVs and campers.) There are three main parts to renters insurance:
- Contents Coverage – this is important to tenants as it covers their belongings within their leased dwelling.
- Liability to Landlord Coverage – this is important to property managers as it protects their property (the dwelling) in cases of damage.
- Loss of use Coverage – this is important to the tenant and property manager in cases where the dwelling can no longer be inhabited due to a covered incident.
What Does Renters Insurance Cover?
Like home, health, and auto policies, what is covered by renters insurance varies. A search for online insurance quotes reveals that prices vary dramatically depending on property location, the type of dwelling, content value, deductible, and reimbursement limits.
Here are possible renters insurance coverage options for those who purchase private policies.
- A simple policy that covers personal contents in a rented home or apartment against loss from fire, theft, non-flood water damage and other listed perils. Renters insurance packages often include personal property stored, or used, in the rented residence, along with coverage for contents stolen from residents’ vehicles or community common areas.
- Most renters insurance policies do not cover water damage as it applies to Liability Coverage. If you’re a property manager, it’s important to check to make sure your tenant’s policy has water coverage to ensure no surprises come up to the tenant if they are at fault for water damage that occurs and they aren’t covered.
- Renters liability insurance protects lessees against financial losses if someone is injured in their rented home due to negligence.
- Liability to Landlord coverage protects property owners against structural loss caused by tenant negligence, such as starting a kitchen fire by leaving a frying pan unattended or failure to secure a fireplace gate that allows a log to roll out on the floor resulting in damage to the carpet.
- The cheapest renters insurance policy might have a higher deductible and limited coverage that caps reimbursement based on depreciated values, rather than a full-replacement value.
Offering Affordable Renters Insurance At Lease Signing
As a risk management strategy, being able to tell prospective tenants and people renewing leases the exact cost of renters insurance for their property reduces stress and shows that the property management company values their clients’ time and money.
Multifamily property managers who require tenants to maintain apartment renters insurance throughout the lease term may decide to offer affordable policies (negotiated to lower individual costs) as part of the negotiated lease terms. Modern property management software like AppFolio also offer renters the ability to purchase renters insurance directly within their online portal.
Giving tenants the opportunity to review policies, customize coverage and deductible limits and pay for their new policy via the online resident portal is a win-win. Tenants get 24/7 access that is convenient and secure, and landlords can monitor compliance from any digital device.
Requiring all that community members maintain an active policy offers many benefits for residents and managers, including the following examples.
- Managers know that should a unit become uninhabitable due to fire, lightning, wind, rain/hail, vandalism, airplane crash, burst plumbing pipes, or any other listed peril, their valued tenants are better positioned financially to replace damaged items and find temporary shelter while the structural issues are repaired.
- Some insurance providers offer management companies a per-policy fee for collecting and forwarding premiums. This is typically not a lucrative revenue stream; however, it does off-set the labor costs. And, with property management software features that track and allocate receivables and automatically disburse recurring payments, there is potential for a small boost in cash flow.
- Some property insurance companies lower their premiums if owners can prove all of their renters have insurance coverage.
- Although not directly related to content coverage, forward-thinking business leaders are adding other coverage options via customized bundles that include identity theft protection specifically designed for renters and insurance that lowers the cost of traditional security deposits. These riders often drive brand loyalty, increasing retention rates for owners, and tenant satisfaction rates.
How Much Does Renters Insurance Cost?
According to insurance industry research, the number of people who purchase renter’s insurance is rising, but currently in the United States, less than half of all renters (about 40%) have an active rent insurance policy.
The average cost of renters insurance is a little more than $15 per month, although prices vary widely depending on which state you live in and stipulated coverage. For example, in North Carolina, one of the states with lower policy premiums, on average renters pay $134 per year. Rates may go up in the Carolinas after Hurricane Florence insurance losses enter the mix – insurance coverage tends to go up across the board any time the industry faces significant losses due to an extreme weather event. On the flip side, renting in Louisiana means you’d pay almost twice as much as east coast residents – $20 per month, $242 annually.
A recent Google search yielded ads for policies starting at $5 per month and escalating to around $22 per month with added riders. The average renters insurance cost can be deceptive because there are so many variables in play that affect prices.
Cost may be affected by:
- Geographic location
- Per capita crime rates
- Regional claim related losses
- Property condition
- Whether the policy is bundled with other coverage (auto, home, RV, identity theft, etc.)
- Discounts offered to bulk buyers – such as property management and leasing companies
- Credit ratings, when purchased individually
- Adding other renters, such as a spouse
Understanding how insurance works, what drives cost variances and the normal claim filing process before presenting tenants with a mandate to purchase apartment renters insurance is critical. Compare renters insurance policies and prices before initiating a new community rule. A renters insurance comparison ensures when a prospect asks “how much does renters insurance cost?” you’ll be prepared with up-to-date information about coverage terms, limits, and price.
Understand there are cheap renters insurance policies that barely cover the basics and more expensive options on the open market with customized riders and increased coverage limits for high-end furnishings, electronics, and jewelry, but most people agree that coverage is a true value for the price.
Now that you understand how to answer questions like “How much does renters insurance cost?” and “What does renters insurance cover?” let’s talk about what isn’t typically covered in a standard renters insurance policy.
Flood Insurance For Renters
Flood damage is not covered under a standard rent insurance contract. The good news is that renters can buy a policy similar to a homeowners policy that only covers personal belonging from the National Flood Insurance Program (NFIP), administered through FEMA.
There is a $100,000 benefit cap per occurrence. Flood insurance is cheap compared to even the lowest priced traditional content policy. There are two rate plans, a Preferred Risk Policy for people who live in a low-to-moderate flood risk zone and standard rates for everyone else, which is slightly higher.
Another important thing you should know about renters flood insurance is that premiums are payable annually, so tenants cannot make monthly or quarterly payments.
The major factors that influence price points, according to FEMA are:
- The age of the building/dwelling
- Flood zone rating
- Number of floors
- The deductible and coverage amounts you choose
- Location of personal items/content
- Building occupancy
Did you know . . .
Roughly 20 percent of all flood insurance claims originate in areas that are considered low-risk? As the old adage goes, “If it can rain, it can flood.” While some people may think buying flood insurance is ridiculous if you don’t live in a flood-prone area, like most insurance, it is usually better to buy it and not use it, than it is to try to replace everything without a financial safety net.
What Should You Do If You Plan to Allow Tenants to Secure Their Own Renters Insurance Quotes?
There is a lot to be said about folding renters insurance cost into the monthly lease payment. However, not all states allow landlords and property managers to mandate tenants to purchase renters insurance. Check with your attorney before you modify your lease. You want to protect your assets and limit risks, not expose yourself to lawsuits and take a chance on violating any state laws and regulations.
If you cannot mandate coverage, make sure your lease stipulates your property management commercial insurance umbrella will not cover tenant possessions or damage caused due to tenant negligence. And, include a statement that strongly suggests tenants purchase both content and liability coverage. Many industry experts also recommend the lease makes it clear that the owners/landlords are not responsible for personal items of tenant’s guests, family members, and other invitees left in the leased unit, or in common areas. It never hurts to cover all the bases.
For those who prefer to have their tenants do their own research, comparing renters insurance companies and getting a renters insurance quote from a list of desirable vendors, it is important to guide your community members toward good buying decisions.
One way to do that is to prepare a brochure or handout that answers some of the most common questions that tenants have about finding the best renters insurance policy.
Your handout should include information that answers basic questions like “How much is renters insurance?” and “Does renters insurance cover a flood?” You should also include answers to more in-depth questions like the ones below. We’ve included sample answers, but you should tailor responses to your community and demographic profiles.
Q: I don’t have many personal items. Do I need renters insurance?
A: Renter’s insurance covers electronics, furniture, small appliances like coffee pots, microwaves and toasters, and all other belongings. Most people do not have enough savings to replace everything is a fire destroyed your rental home. Also, if someone gets hurt in your home, you could be sued for personal injury and medical expenses. What it comes down to is if you’re a renter, you have personal belongings, and you want to mitigate potential risks, that’s when you should consider renters insurance.
Q: How much renters insurance do I need?
A: Well, how much would it cost to replace your stuff? A $10,000 policy is a good starting point. To get a better idea if that is enough for you, it is a good idea to make an inventory of all of your assets and estimate how much it would cost to replace everything. Insurance agents often recommend you only include items that have a value of $500 or more. Some of the most common items are computers, cell phones, entertainment equipment, security systems, jewelry, furniture, artwork, and appliances.
Q: Is there a way to tell if cheap renters insurance is a good buy?
A: Sometimes an inexpensive policy offers minimal coverage. Sometimes the old adage rings true, “You get what you pay for.” If cheap means you’ll have trouble reaching a customer service representative if you have to file a claim, cheap is no bargain. When looking for insurance, the value is often more important than the actual price tag. Decide what type of coverage you need/want, a comfortable deductible amount and whether you want to bundle your apartment renters insurance policy with your auto coverage or find another company with a lower rate. Choosing an “A-rated” insurance company (National, Allstate, GEICO, etc.) typically ensures you are getting the best value for your money and you won’t have major issues getting a claim paid should a disaster happen. You can check an insurance company’s rating and performance through agencies like A.M. Best, Standard & Poor’s and J.D. Power and Associates.
Final Thoughts About Renters Insurance & Risk Management
Risk management starts and ends with forward-thinking strategies. If you mandate renters insurance as an integral risk management prong, make the process simple, affordable and trackable. With technology built into your property management software, you have the power to sign up new tenants during the leasing process. Tenants will appreciate the value of insurance products designed specifically for renters that are competitively priced, and they won’t have to spend days filling out forms to get individual insurance quotes online. Owners will applaud solutions that addressed issues with uninsured and underinsured tenants. And, property managers will have total compliance oversight from a single login. Win-win-win.
Learn more about AppFolio’s all-in-one property management solution that includes the capability for tenants to purchase renters insurance directly from their online AppFolio portal. When tenants apply for renters insurance through AppFolio they are guaranteed coverage and consistent pricing with our policies – no denial or higher rates for poor credit or recent claims history. Property managers can also enroll residents in Liability to Landlord Insurance instantly for increased protection. Tracking and built-in reports make it simple to mandate insurance and ensure you have full compliance. Sign up for a free demo to see how AppFolio Property Manager can change the way you do business.