One of the issues real estate owners and operators invariably solve for is reducing the impact of tenant-caused risk. Successfully managing single- and multi-family portfolios of size requires continual vigilance and full visibility across the entire portfolio. Despite best efforts of minimizing risk, tenant-caused claims will always appear on loss run reports, and will stick around for 5 years or more. This is due to 3 main factors:
- Compliance Gap: Up to 31% of your tenants are experiencing a gap in compliance, or on their way to becoming uninsured, due to a number of factors including policy cancellations, bad data, moral hazard, and fraud.
- Care, Custody, and Control: The 3 C’s of liability are up for debate; Care, custody, and control is an exclusion in general liability that removes coverage for someone else’s property damaged while in your possession.
- Negligence Hard to Prove. Negligence by residents is hard to prove. Negligence laws are often unclear, and it often is hard to hold someone financially responsible
A loss run report is required when filing for a new insurance application, to shop for a lower rate, and at renewal. Typically, insurance companies a 5-year history for a loss run report, but they can request as far back as when coverage began. And if there are insurance policies through multiple providers, a loss run report is required from each provider.
When going through the underwriting process, claims history is one of the biggest factors looked at, and if there are multiple claims, the premium will simply be much higher. The focus of this paper will be how to minimize the impact and frequency of tenant caused risk that directly impacts loss runs and premiums.
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