renter's insurance

Renter’s Insurance: A Valuable Commodity to Entire Multifamily Industry

The past and coming weeks seem to hold a wealth of natural disasters for our country. In light of the power of nature we decided to focus, this week, on insurance, more specifically renter’s insurance that your residents purchase to protect themselves and their belongings.

In recent years there has been a trend in multifamily toward requiring residents to obtain renter’s insurance alongside their lease signing.  It is really no different than the country clerk requiring you to prove that you have insurance on a vehicle before tagging and titling it.  Or is it?

WHY renter’s insurance?

Let’s just say that your resident has a fire. One of their personal belongings causes a fire resulting in $20,000 in damages to their unit, as well as the one below it (flooding due to fire services). Even if your lease agreement clearly states that the resident is responsible for the damages, and the resident is un-insured, actually collecting that sum from a single individual, is unlikely.

  • The resident who could, theoretically, move out in the middle of the night with no forwarding address.
  • Even if they stay through their lease term, you can bill them in increments but it will take a LONG time to pay off a $20,000 debt and lease terms are generally 1-2 years.
  • You risk creating ill will forcing an eviction situation or worse.
  • Maybe you end up with a lien judgement but if the resident has no collateral you may still be unable to collect.

With many residents living paycheck to paycheck, you have a much greater chance of NEVER actually collecting the sum owed, than you do of having your community paid back.

Additionally, claiming damage reimbursements from your own insurer may be problematic with rising deductibles and incidence regulations.

No renter’s insurance? WHO is stuck footing the bill for the damage?

Well that is a pretty easy answer: YOU!  The multifamily community/ property management company, often ends up shouldering the burden of damages, repairs, etc. whether or not they can recover costs. This is a hard truth to swallow.

WHAT should multifamily be doing about lack of renter’s insurance?

So many issues can be remedied by simply ensuring that residents themselves carry insurance for their own property and damage. According to :

“Renters insurance is not mandated by any state government, but an increasing number of landlords are beginning to require tenants to purchase coverage of up to $100,000 as part of their lease agreement.”

Many leasing agents worry that requiring potential residents to retain additional insurance payments will dissuade them from signing a lease.  While this may be true on occasion it is not as a whole.  The larger issue is truly educating your residents to the truths of insurance.

The TRUTH of Insurance.

Insurance coverages for multifamily communities or property management companies themselves will cover damages to things like walls, floors, infrastructure and even appliances owned by the community.  It will NOT, generally, cover the cost of any personal belongings destroyed by the incident. In addition, the insurance will not cover any costs that the residents may incur while being displaced.

Renter’s insurance can also safeguard your community from attempted collections if one resident’s issues affects another.  This will eliminate you needing to be involved as a third party in many harmful suits between residents for either property damages or bodily harm.

If residents properly protect themselves by purchasing renter’s insurance, they can find reasonable policies that pair with their auto insurance often offering discounts for the combination.  This can make the whole idea even more affordable! And yes, you CAN require your residents to obtain and maintain renter’s insurance during their tenure in your community?

HOW/WHEN to educate your residents about renter’s insurance.

The best way to provide your residents with education toward renter’s insurance is before they EVER lease from you.

  1. Think about creating a “renter’s insurance cheat sheet” that will clearly lay out the negatives of NOT having renter’s insurance as they can often be more compelling that showing it in a positive manner.
  2. Clearly outline the differences between coverages.
  3. Help your residents by showing them how inexpensive levels of coverage CAN be.
  4. Potentially work with an insurance agent to offer a group policy inside your community.
  5. Offer a list of references for insurance agents or plans that would be beneficial to the resident.
  6. Show tips for savings on premiums and show them how they could potentially save on other bills when combining coverages.

Having residents inside your community who are NOT insured, is a huge liability to everyone including the management. As leasing agents and property managers you CAN help your residents to make good decisions. Purchasing renter’s insurance is good for everyone involved!


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