My Landlord Wants $5,000,000 Of Philadelphia Renters Insurance!
We recently were asked this question. $5,000,000 of Philadelphia Renters Insurance! Actually, it’s not a question, it’s a statement. But the implied question is: “What? Why? How?” After some additional probing, we came up with the answer. The landlord is being perfectly reasonable considering the situation. Also, it’s not a Philadelphia renters insurance policy that he needs.
The caller stated that he needed $5,000,000 of Philadelphia renters insurance. That’s interesting, but certainly not without precedent. After some probing questions and a fair bit of difficulty extracting answers, the facts are as follows:
- “We” are trying to rent the house.
- A “national entity” must insure the home for $5,000,000.
- “We” would be paying $14,700 a year for renters insurance.
- The monthly rent is $6,000.
- The home has ten bedrooms and two large living rooms.
Care to draw any conclusions from the above?
First of all, the landlord is clearly looking for $5,000,000 in liability. They are not expecting the tenant to insure the home in the sense of covering the structure itself. The landlord wants to be certain that if the tenants destroy the home with a fire or similar loss that the landlord will be made whole by their policy. The more expensive the home, the more liability coverage the landlord is likely to require. They’re lending you a rather large asset for a rather long time, they have a right to be concerned.
What is this “national entity” of which you speak? At first, we thought it might be odd phrasing for an insurance company that does business nationally – as opposed to one of the really tiny unrated ones that do business in a handful of states and take advantage of regulatory loopholes to avoid disclosing their financials. That would be a reasonable request, actually.
But that’s not what the landlord meant at all. The landlord meant that the national entity to whom the tenants are responsible must be the organization providing the liability coverage for the home (and presumably leasing it). When the resident said that “we don’t have a national organization,” it clicked.
This guy… This one individual guy… Is trying to insure a fraternity house. For a fraternity that has no national entity, and is held responsible to no one. Ten bedrooms means at least twenty residents. Each person would be paying $300 a month, and as a result would be unlikely to care much for the building they live in.
Now technically he could go out and get an umbrella policy that would cover the $5,000,000 the landlord wants. That’s all well and good, and on top of a Philadelphia renters insurance policy, he might be able to get away with paying a grand a year or less for all of that liability coverage. But here’s the problem.
He would be the insured, personally. There would be no coverage for the other nineteen or more people residing in the household if they caused the loss. There would also be no coverage for the fraternity or other organization that would be leasing the home. Any liability claims of any kind that did not directly involve the one named insured would be denied. Whether that’s an alcohol-related injury suffered by a guest or a fire that destroys the home, if he’s not personally responsible, there is no coverage.
The takeaway is this: There are very few true curveballs in insurance. When someone starts asking questions, but doesn’t want to answer them, an insurance professional will generally know that there’s something not being disclosed. Often, an insurance professional will decline to issue the policy if there are too many unanswered questions that make the risk not quantifiable.
But if somehow you lie or fail to disclose a material risk factor (such as twenty or more people living in a fraternity house and you want to insure one of them with limits that are well out of the ordinary), what will happen? When there’s a large claim, will the insurer throw up their hands and say “It’s not the risk we thought we were covering, but there’s a policy in force and so we’ll pay it”?
Not a chance. The insurer will deny the claim, cancel the policy, and call it a day because you lied about the risk they were taking on.
As an insured, there are very, very few expectations you need to meet in order to get a claim paid:
- Be honest on the application.
- Mitigate the loss if possible and safe.
- Provide accurate information about the loss to the company.
- Not be committing fraud.
It’s a bit more complicated than that, of course, but not very much. If you lie in the application process, you do not have insurance because your claim will not be paid. You will be personally responsible for that loss, and that landlord will chase you to the ends of the earth – and as long as you live – to get payment from you. Just be honest, and it’s smooth sailing.
To find out more about renters insurance in Philly, or to get a quote, just call an insurance expert for PA renters at (800)892-4308 or click to get covered - whether you need Philadelphia renters insurance quotes online or coverage anywhere else!
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