Most property managers require residents to have Long Beach, CA Renters Insurance. Requiring renters insurance is just part of the greater risk management strategy employed by management companies. Some of these strategies are copied by smaller landlords, but risk management is not a one-size-fits-all concept. It’s a concept that needs to be tailored to your portfolio, your assets, your exposure, and your risk tolerance.
So what happens when a smaller landlord starts requiring renters insurance? Does that carry additional risk to the landlord?
Additional Risk To Landlords From Requiring Renters Insurance
By mandating coverage, you’ll find that you have a significant risk of finding better tenants. Any tenant who sees the requirement and indicates they already have a policy is probably a better risk than a tenant who grumbles about having to buy a policy. Better tenants mean you make more money and your properties remain in better condition. Long term, that’s better for your business.
Be careful, though. Some large property managers want to be listed as additional insured on their tenants’ policies. Requiring renters insurance with that designation may work for a large property manager who is primarily seeking defense coverage under the policy if both they and the tenant are sued. But you want the ability to seek coverage. If you are an additional insured, you may not be able to make a claim against the tenant’s liability coverage when they cause a loss.
What you actually want is the status of “additional interest.” Additional interest gives you notifications of policy status changes, without making you a party to the policy. No coverage is conferred. As a result, you still have all of the usual rights of any third party to make a claim against the tenant’s liability coverage. You also get the benefit of being made aware if the policy cancels, lapses, non-renews, or otherwise has a change in status. That’s important because people do sometimes show proof of coverage and then immediately cancel the policy. As additional interest, you’d know immediately and be able to trigger whatever penalty your lease sets out when requiring renters insurance.
There’s a risk that mandating tenant coverage could cause your insurance premiums on the building to drop somewhat. Many companies offer some sort of discount on commercial and landlord policies if the lease requires tenants to be covered. The discount is available because the company can subrogate against the tenant’s policy in the event of a loss. That allows them to recover some or all of what they paid on the claim.
Does Requiring Renters Insurance Carry Additional Risk To Landlords?
Requiring Long Beach, CA Renters Insurance also brings the risk that potential tenants will know you’re on top of your game and have a well-written lease that you intend to enforce. That offers two benefits. First, it acts as an automatic screen against people who present well but don’t want a landlord who enforces his rights under the lease. Second, it attracts better tenants. Simply put, the sort of tenant you want is the sort of tenant who expects you to enforce your rights as well as respect theirs.
We strongly suggest that you avoid the additional insured designation, and stick with additional interest. Aside from that, you can see that there are no real risks to a landlord from requiring renters insurance. In addition, there are real and concrete benefits to be derived. You may wonder how you can track tenant compliance with the requirement. Some small landlords use paper, some use a spreadsheet. Effective Coverage offers an easy and automatic way to track tenant compliance. The platform allows you to manage compliance quickly and easily. It even integrates seamlessly with popular property management software.
To find out more about renters insurance programs for landlords of any size, please call (800)892-4308. The Effective Coverage platform also allows residents to purchase a policy in just sixty seconds. Notification to the landlord is instant and the policy data is immediately visible in the tracking platform.
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