But just how many renters kept their policies intact throughout the duration of their rent cycle is an unknown. The numbers don’t take account into how many residents drop their policy shortly after presenting it to comply with a landlord’s mandate to have one in order to rent the home.
“The resident may say they have another source for insurance and purchase from an unknown third party,” says Jay Stoltz of LeasingDesk Insurance. “They bring back a declaration page, showing they are compliant, then two weeks later the resident cancels, believing they have beat the system.”
It’s more than worth it for homeowners to make renter’s insurance a priority
Compliance issues are not that uncommon, Stoltz said. Unlike an automobile liability policy that some states require for the privilege of driving, renter’s insurance is purely optional for the resident unless mandated as a condition for rent. But there is no universal compliance tracking.
Industry data shows that property owners who require renter’s insurance spend about 45 percent less on repair and recovery expenditures than properties that don’t mandate the coverage. Those who do not, risk about $22 per unit per year for every unit that isn’t covered by renter’s insurance.
“First and foremost is it’s a way of cutting cost,” Stoltz said. “Renter’s insurance is very benign for a property management company. There is no cost for a PMC, yet they receive full benefits. Zero capital outlay. Secondly, they have the potential to lower their commercial insurance by incorporating a mandate that residents have renter’s insurance. There’s not cash outlay and they can save money.”
The key is overcoming a mindset that renter’s insurance is costly
Not surprisingly, the Insurance Information Institute poll showed the vast difference between homeowners who have insurance (95 percent) versus renters. Of course, financed homes are generally required to have insurance, but it’s very unlikely that a homeowner will drop coverage after the note burning party. There is an investment to be protected.
While a renter doesn’t have a big investment at risk, there is still much for he or she to lose. Potentially at risk is tens of thousands of dollars in property damage, as well as personal belongings.
Convincing the resident that spending $12-$15 per month for renter’s insurance is a tough sell, Stoltz said. It’s overcoming a mindset much like the industry has fought over the years when properties feared the additional cost for coverage would hinder lease-ups.
“Then everyone came to the realization that both parties have an interest,” Stoltz said. “It’s protection for the asset and it’s coverage for the resident for that thing that nobody expects will happen does happen.”
Just having a place to go for the insured renter is reason enough. So, too, for the property management company.
“In the event there is a displacement that requires an additional living expense, you’re going to have these long lines of residents asking where they are going to be put up,” Stoltz said. “As a (property manager), that’s the worst conversation that you can have, if with a resident who isn’t covered. With renter’s insurance, you just say that you have a claims adjuster that is going to take care of you.”
And until the day that renter’s insurance is mandatory – if and when that ever happens – property owners must encourage residents to spend a little extra each month for coverage, and at the same time manage compliance, Stoltz says. It’s well worth it.