Many landlords wonder should I require tenants to have renters insurance. The answer is always yes.
There are the traditional reasons such as the common misconception among tenants that you’re responsible for their personal property and the fact that their policy would respond to a fire caused by tenant negligence.
All these are common. But we’d like to offer two additional examples of why it’s imperative to mandate renters insurance in your lease, examples which take money directly out of the pockets of landlords and put that money in the pockets of tenants.
First, the recent Avalon at Edgewater fire. Within a matter of days after the fire was finally out (which took several days to accomplish), Avalon was letting people out of their leases not only in the destroyed building but in the other building of the community which was entirely unaffected by the inferno. It’s our understanding that the victims of the fire and people who were being let out of their leases in the other building were not only getting their deposit and prorated rent returned, but checks for $1,000 per unit.
That works out to roughly a half million dollar hit that Avalon took just to make potential problems go away. If every unit had been required to have renters insurance, loss of use expenses such as a hotel stay while finding a new apartment would have been covered since the fire would have been a covered loss. Proper enforcement of the renters insurance requirement could easily have saved a publicly traded corporation half a million dollars or more.
The second example comes to us from Matthews, NC and is more recent. Twenty residents of a community there were displaced by a fire that caused only minor damage. It’s suspected the fire was electrical, probably not an issue of tenant negligence. In that instance, the apartment complex has publicly stated that they will reimburse residents for their hotel stays. Twenty residents times a hypothetical week hotel stay times an average price of nearly a hundred dollars a night in the Matthews area means the management company is out about fourteen grand before they even repair the minor damage.
You know what deductibles look like on commercial insurance – if the damage truly is minor, repairs combined with the hotel costs might not even reach that deductible. That means the money comes out of the property manager’s pockets and goes directly to the tenants. This, obviously, is a situation to be avoided. Charlotte, NC renters insurance would have taken care of those additional living expenses, and saved the property manager fourteen grand!
Should I require tenants to have renters insurance? Absolutely! By requiring tenants to have renters insurance, you reduce exposure, ensure that tenants understand you’re not responsible for their personal property, and protect yourself and all residents from the costs involved in tenant negligence.
Tracking compliance, of course, is the difficult part. What if you could generate a list of tenants without insurance in real time? What if you could charge them extra rent or a waiver fee based on that compliance? What if you didn’t have to deal with the paperwork for proofs of coverage, cancellations, reinstatements, and all the other mail that policies generate when you’re listed as an additional interest?
Effective Coverage manages proofs by allowing tenants to submit them online, cancellations and reinstatements are managed through a central processing center, and instant real time reporting is built into the platform. Several programs are available to match your property needs, such as Renters Insurance Elite and Renters Liability Pro, along with resident indemnity solutions.
Should I require tenants to have renters insurance? Yes. Since it doesn’t cost you anything, and has the potential to have a significant impact on your bottom line, there’s no question. Reach out to Effective Coverage today to find out more about how to require renters insurance, how to track renters insurance compliance, and how to make the entire process seamless! Call (800)892-4308 extension 3 to speak with our Property Manager Relations Department to see how a solution can be customized to your specific needs – whether you have ten units or ten thousand units.