Apartment Owners and Managers Find Peace of Mind in Requiring Renter’s Insurance


Word among apartment owners and managers about requiring renter’s insurance is literally spreading. At a recent dinner in Boca Raton, Florida, with about 15 multifamily property representatives, a quiet conversation about whether apartments should require residents to carry insurance quickly became quite vocal.

An operations executive of one of the industry’s largest property management companies sitting across from me feared that if renter’s insurance became required as a condition of occupancy that the property would lose leases. “I’m really concerned about this,” he said. “We can’t afford to lose leases and I’m worried that this is going to push them away.”

Before I could say anything, word of the topic started moving around the table. One by one, executives from the six or seven owner/managers at my end of the table shared stories of their initial reluctance to mandate renter’s insurance followed by the reality that their site teams experienced no push back from prospective renters.

“You know, we were worried about the same thing,” said one from the Midwest. “So we put it out there on a test, and after about three weeks we cancelled the test because we had no push back from anybody at all. So, you just need to do this. Just go big, or go home.”

The next person shared his initial concerns that mandatory insurance programs would cause occupancy issues in tougher markets. Another expressed initial concern requiring insurance of lower rent communities. In both cases, they later found that they had no real push back from renters in those markets or communities. After hearing about six or seven very similar opinions, I looked across to the executive with whom the conversation started and told him that I had nothing to add to the conversation.

Mandating renter’s insurance is becoming common practice in the apartment industry. With renter’s insurance coverage, the financial liability for a resident-caused accident is shifted from the property owner to the resident by covering the cost of such losses below the property owner’s property insurance deductible or retained risk.

A National Multi Housing Council Risk Survey last fall reveals that 66 percent of respondents now require renter’s insurance regardless of the state or municipality. A lively chat recently on an industry discussion forum confirms the same message: Requiring renter’s insurance is becoming an industry standard. Even MSN Money is chiming in on behalf of renters, warning them that not getting renter’s insurance is one of the 10 biggest mistakes a renter can make.

The topic has been ongoing for the past six to seven years, but why now are renter’s insurance requirements finding their way into so many lease agreements?

The simple fact is that a volatile insurance market has put more burdens on property management companies. Typical deductibles range between $10,000 and $25,000 while the typical grease fire in an apartment kitchen costs about $8,000 – meaning that, without renter’s insurance, the apartment owner usually has to cover the entire cost of the resident’s negligence.

The statistics don’t lie.

According to a 2006 study, the National Fire Protection Association estimated that there are 95,000 fires annually in multifamily buildings, of which 70 percent are caused by residents’ negligence. Fires get started from smoking in bed to leaving a pan of slow-cooking bacon unattended, and everybody is at risk.

Industry data shows that apartment 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.

Rather than take an all or nothing approach, many properties ease into required renter’s insurance programs. Mandates are being implemented in stages, first with new residents, and then as leases for existing occupants come up for renewal. In both scenarios, there is minimal resistance.

Numerous success stories show that renter’s insurance is the right thing to do for all parties – even the resident who could pay for a lifetime for causing damage or be the victim of a negligent neighbor or building disaster.

Steve Abeyta, Director of Risk Management and Claims at Archstone, recalled a January morning in Boston when a 6-inch water main linked to the fire sprinkler system malfunctioned and flooded the ninth and lower floors. About half of the affected residents had renter’s insurance, affording Archstone relief in a claim of about $500,000.

“The fact that 50 percent of the residents were insured provided Archstone the ability of not having to deal with irate residents because they didn’t have insurance and they would be looking to Archstone to compensate them,” he said.

That’s peace of mind – for both the resident and the property.

Have you mandated renter’s insurance on your apartment properties? Have you experienced any push back from prospects or residents? Share them in the comments below.


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Contributor, Property Management Insider

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Michael Cunningham is Content Marketing Manager at ProofHQ, and the former Managing Editor of PropertyManagementInsider.com. He worked as a social media manager for RealPage, Inc., a provider of on-demand software solutions that integrate and streamline single-family and a wide variety of multifamily rental property management business functions. He is responsible for promoting the company through various media channels, including editorial, print and online advertising, and social media. Michael received his education at Indiana University where he majored in English.

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