Here’s a question: Do your residents have renters insurance? If you can’t answer that question, it’s time to do some investigating.
Chart of Accounts
Want clearer, cleaner books? What about a more useful view into your properties or just easier accounting in general?Get the Guide
That’s because renters insurance policies aren’t there just to save money for residents. It saves money and headaches for your owners, as well. Imagine there’s a kitchen fire and your resident has to move out while you make repairs. Renters insurance will pay for their temporary relocation, which makes it more likely they’ll come back when repairs are finished. Without renters insurance, they may simply break their lease, leaving you with a vacant property.
And what if a visitor’s property is damaged in that fire? Renters insurance will cover the cost, so that visitor doesn’t go after your owner.
As a property manager, if you don’t require—or even encourage—renters insurance, there’s a good chance your residents haven’t looked into coverage themselves.
The solution? Offer renters insurance as a part of your management services at key points in their journey.
Renters insurance can be a win for everyone involved. Your residents get coverage, sometimes for a discounted price; and you and the property owner are protected from covering repair bills (for renter-caused damages) or replacing damaged property that the renter can’t afford.
Renters Insurance 101 for Property Managers and Residents
Before you decide to offer renters insurance, it’s a good idea to have a handle on your options. What does a typical policy cover? How much does it cost? How can you get the best possible deal for your residents? How does it integrate into property management software? There are lots of questions, but let’s start out with the basics.
What Does Renters Insurance Cover?
There are different types of renters insurance that cover a variety of things, but the two most common policies are personal property and liability—each with a long list of benefits.
Personal Property Coverage
Personal property coverage (also known as property damage coverage) will protect against theft of or damage to your residents’ personal possessions within their unit. If an electrical surge shorts out their coffee maker, it’s covered. If a thief makes off with their expensive jewelry, that’s covered, too.
In some cases, personal property insurance will cover other people’s property that’s damaged or stolen within the apartment. So, if that power surge damages a guest’s smartphone or laptop, that’s covered, too.
According to State Farm, most policies will cover damage caused by theft, water damage from leaks, snow, freezing, smoke, falling objects, and vandalism, among others.
Depending on where you live, some companies will let you add on natural disaster, earthquake or sewer/drain backup insurance to your policy, as well.
What personal property coverage insurance policies won’t assist with, no matter where you live, is damage caused by floods. If you live in a flood-prone area, you can look into flood insurance from a private company, or go through the National Flood Insurance Program, provided by FEMA.
Liability protection insurance covers unintentional injuries or other harm done to someone in or near a resident’s unit. If a visitor trips on the stairs and hurts themselves, they could sue the resident for damages. Liability insurance will pay for that and can even cover any medical bills incurred.
Now, we say ‘unintentional’ because it won’t cover harm that your resident inflicts intentionally (not that any of your residents would do such a thing). Some policies, however, will cover intentional harm done by children under the age of 13.
In addition, renters insurance protects against liability claims regarding your owners’ properties and potential repairs related to renter-inflicted damage.
Finally, renters insurance can cover cost-of-living expenses if your resident needs to move out. If, say, lightning strikes your rental property and starts a fire, your residents are covered for things like temporary relocation and additional living expenses.
Plus, if they’re covered while you clean up the damage, they’re more likely to come back when you’re done.
Do the homework and look into all the options. Being well-informed will help you find the right company and coverage to fit your needs as well as those of your residents.
How Much Does It Cost?
The cost of renters insurance depends on the kind of coverage that you or your resident chooses. Monthly premiums can vary by the state you’re in, and even by ZIP code. If your property is in an area that an insurance company considers relatively safe, monthly payments will be less expensive.
Other variables that affect the cost of insurance include the type of unit (apartment, duplex, single-family, etc.), the size of the building or complex the unit is in, whether your resident has a pet, and your resident’s credit score.
That said, renters insurance coverage is still pretty inexpensive. The average policy, which includes personal property coverage, liability, and relocation can be as low as $12 a month with Buildium’s Renters Insurance, powered by MSI. A policy in that range will usually include enough coverage without a huge deductible.
Should My Property Management Business Require Renters Insurance?
Depending on where your properties are located, you may be able to require your residents to carry renters insurance before they sign a lease. This can set the tone with a renter right from the start—and safeguard the owner’s property. As mentioned above, there are very real benefits to renters insurance, including protection of personal property as well as liability in regard to others affected by a renters’ missteps.
Factors to Consider When Suggesting Renters Insurance
If you’re requiring, or even suggesting, renters’ insurance for your tenants and you want to offer them a list of acceptable policies, there are a few considerations to run through beforehand.
First, look at insurance companies’ ratings and reviews to see what customers—and former customers—are saying about their coverage and customer service, and how quickly and easy it is to make and collect a claim. You can even check them out with the Better Business Bureau.
Second, make sure the monthly payments and premiums are affordable and that the policies offer good coverage for their price.
Finally, look at their deductible amounts. An inexpensive insurance policy is no good if your tenants end up paying a high deductible.
Master Insurance Policies
One way to ensure all residents and owners are covered is to look into a master insurance plan to offer alongside renters insurance. Master insurance, in general, is a term that’s often used to define a type of umbrella insurance policy.
A typical master insurance plan will cover liability and any resident-caused damages listed within the policy, but not residents’ belongings. Master insurance plans can allow the resident to meet the tenant liability coverage requirements placed within a lease agreement, usually at a lower cost to the tenant than renters insurance.
The property management company is listed as the primary insured, which also safeguards the property owner from rising premiums and the need to file a claim on their own policy.
With a master insurance plan, there’s the potential for ancillary income, as well, through administrative fees directly within property management software. Just make sure your state’s or municipality’s laws allow that.
State Regulations for Requiring Renters Insurance
Talk to your property owner clients to get their input; but in general, it’s a best practice to require your residents to get renters insurance, or some kind of master insurance policy, as part of the leasing process. Guidelines on this can vary by state, and even by municipality, so make sure you check your state and local laws before making the change.
For example, the San Francisco Gate points out that landlords and property managers can’t require renters or master insurance in the middle of a lease, where there was no requirement before. If you want to require insurance for current residents, you may have to wait until the old lease ends, then add a clause to the new lease.
How to Implement Renters Insurance
If you’ve decided to require renters insurance, here are 4 steps that will get you on your way:
- Understand the characteristics of your property and your residents: Do you live in an area with a risk of flooding? Do you have any restrictions on the pets you allow? Are your residents mostly single, or do they have families? How much are residents willing to spend? All of these variables will affect the cost and type of coverage they’ll need. You’ll want to go into discussions with insurance companies prepared with this information.
- Shop around: You can look at the national brands, but there are usually smaller companies in your area that may offer a better deal. You should get a variety of quotes from different insurance carriers before making a decision.
- Make it easy: Give residents the option to sign up for insurance through your property management software as part of their onboarding process. Your residents will appreciate how easy the process is, and you’ll benefit from being able to track which residents are enrolled.
- Educate your residents: Invite residents to a virtual meeting or workshop to learn about renters insurance. If you’re working with an insurance company, invite a representative to speak to your renters. They can highlight the importance of renters insurance, discuss cost and coverage, and answer any questions that your residents have.
Offering renters insurance to your residents shows them that you care about their possessions and well-being—and it protects you and your property owner from unnecessary headaches. Once you make it a part of your process and strategy, your renters insurance will be yet another way you add your value and expertise to the mix.Read more on Renters Insurance