Pub. 1 2016 Issue 3

23 ISSUE 3 2016 䌀吀䄀䄀 吀䠀䔀䌀伀一一䔀䌀吀䤀䌀唀吀䄀倀䄀刀吀䴀䔀一吀䄀匀匀伀䌀䤀䄀吀䤀伀一  the results of a study about the impact of renters insurance on revenue generation. The studying involved benchmarking multiple management companies that im- plemented mandatory renters insurance in 2008. ose conducting the study bench- marked the cumulative indexed revenue performance for these companies against their markets, submarkets, and zip codes. What they found was that mandatory renters insurance did not impede perfor- mance. Communities that mandated rental insurance beat the market index and the zip code index but not the submarket in- dex. However, the di erence between the communities and the indexes, regardless of the result, was not signi cant. If renters insurance is cheap enough that it doesn’t impact whether someone will continue to rent from you, what does that mean in terms of implementing amandated insurance program? Most renters are probably interested in bundling their coverage along with their other insurance coverage in order to get a better rate. Doing so presents two problems: • How does the renter know bun- dled coverage is adequate? When insurance products are bundled, the chance of someone needing to le a claim is obviously bigger with multiple policies than it would be with a single policy, which means policies are subject to cancellations and premium hikes. • How do you know whether someone really is maintaining renters insur- ance? Insurance companies are per- fectly capable of dropping someone’s coverage and have no requirement to notify the property management company of that change in status. If you are going to mandate renters insurance, it is probably better to have renters do so with a separate policy. Be sure to select a company that will tell you when a policy lapses, is about to expire, or has been cancelled. It is also possible for providers to send renters automated email reminders when they move in and when they are not covered anymore. WHAT SHOULD RENTERS INSURANCE COVER? • eft coverage is di erent than bur- glary coverage. If someone is robbed, it’s necessary to prove forced entry or some other kind of break-in before burglary coverage will kick on. For theft coverage, a renter just has to le a police report about the theft and then provide the insurance company with a copy of the report. As a result, renters will do better with theft cov- erage than burglary coverage. • Coverage should be for more than just an apartment. It should also cover anything in a car, garage, or storage unit, as well as for losses that occur while traveling. • Since a renter might have multiple roommates and the occasional guest, rental insurance should cover these people as well. • Immediate quali cation and same- day coverage are also important. If a renter has to wait for a background or credit check, that is a period of vulnerability. Same-day coverage is important because renters should know that they are covered the very day they move in. at’s a day that involves carrying a lot of boxes and furniture, which means it is also a bad day not to be protected in the event of an accident. • Payment options and deductible lev- els matter. Common deductibles are $250, $500, and $1,000. Insurance plans should also allow convenient payment structures for renters so that payments can be made once a year, once every six months, once every three months, or monthly. • Encourage renters to nd out what the insurance policy promises in the event of apartment damage during an emergency. e additional living expenses (ALE) part of an insurance policy should provide a renter with money to pay for temporary lodging or utility costs if an apartment is damaged enough that the renter has to live somewhere else for a while until repairs have been made and the apartment is habitable again. • Does the renter have a pet? Pet dam- age endorsements are a good idea, but it’s better for the renter not to have a breed restriction on the policy. ese endorsements cover damage that wouldn’t be covered adequately by a pet deposit. If a dog destroys the baseboard or ruins carpeting by urinating on it, pet damage endorse- ments can pay for the repair work and new carpet. • Policies often have other endorse- ments that are optional. For exam- ple, maybe coverage for $50,000 is more appropriate than coverage for $20,000. A renter might also be in- terested in having liability coverage for issues such as toilets, showers, and bathtubs that over ow and cause water damage. Renters insurance certainly bene ts rental property management, but it is also some- thing that can save renters money in the event of an emergency. Fires, burglaries, and natural disasters are a part of life. By mandating renters insurance, you are protecting everyone involved at very little cost to the person renting from you. If renters understand the bene ts, they are likely to appreciate the fact that you are making sure they are covered when it comes to anything expensive and unpre- dictable. During the rst half of 2015, insured losses caused by natural disasters cost $12.6 billion. With that kind of money at stake, it makes all kinds of sense for renters insurance to be mandatory.