Overcoming the Challenges of Renters Insurance
Renters insurance adoption has gained ground in the last few years, but it still lags behind the percentage of homeowners who are protecting their assets. A big reason may be that many homes are either insured to meet mortgage requirements or owners get it that perhaps their single greatest personal asset needs to be protected from fire, theft, and natural disaster and so on.
Convincing renters to insure their unit and belongings – which are subject to the same types of losses – is another story. In recent years, the big question in multifamily housing has become whether to require renters to take insurance as a condition of their lease. While the apartment industry hasn’t adopted an across-the-board policy, more landlords are requiring a policy as a condition of the lease.
However, some properties don’t push the envelope for fear that the additional cost of insurance could chase away prospects in an already competitive rent market. And, even when a resident is required to take out a policy, it’s not uncommon for it to be dropped after a few months, leaving the property vulnerable.
Property managers not only face the challenge of properly insuring their assets but also have to maximize compliance and encourage renters to maintain coverage at all times.
“There are lots of challenges from the property management perspective,” says Ed Wolff, President of LeasingDesk Insurance. “Residents are moving in without renters insurance. Residents are cancelling policies after they move in. There are challenges with verifying third-party renters insurance policies, and at the end of the day, how do you protect yourself?”
At an education session during July’s RealWorld, industry professionals who require renters insurance at their properties offered ways to ease the pain. They say it’s just a matter of effectively communicating the requirement to the renter, staying on top of internal and external compliance and monitoring and enforcing compliance throughout the term of the lease.
Communicating the insurance requirement to your renters
Letting the resident know about insurance requirements starts well before the lease is signed.
Rebecca Daniels, Greystar’s Director of Resident Insurance, said the first opportunity is during the tour, and the model or vacant unit is the perfect place to begin a dialogue.
“Have that conversation in that exact spot every time,” she said. “You want to draw a picture of why the resident should have it, where they should have it. Choose that location and set a brochure in there. When you walk into the room you can start that conversation.”
It doesn’t hurt to share a story or two about how a resident benefited from having the insurance either while the prospect is taking a tour.
Also, Daniels said another opportunity is back at the office by explaining there is an interested third party requirement when discussing lease terms. She also recommends embedding a link in the online leasing process that allows the prospective resident to upload their insurance certificate or obtain insurance.
“We focus on the online leasing process,” said Kip Zacharias, Vice President /Business Service at Camden. “At every point of contact during the process, we make sure we have verbiage explaining our insurance requirements. The other really effective thing, we do is make this a required task as part of the move-in process.”
Convenience and ease to establish renters insurance is important, Daniels said. And remind that the renters insurance isn’t that expensive.
“When new renters hear insurance, they fear that it costs too much,” she said. “But when they hear that it’s just a few dollars a month they settle down.”
Ensuring the onsite team is on board with renters insurance compliance
Just as important as selling the renter on insurance is making sure that onsite staff understands and complies with the insurance requirement. Daniels recommends compliance reporting that is distributed at not only the senior level but to onsite personnel so everybody stays in the loop.
Rae Schnabel, Director of Sustainability at Maxus Properties, says in a perfect world a property that requires renters insurance should be at 100 percent compliance, but cancellations pop up and usually aren’t seen until the end of the month or later. That’s when it pays for property managers to see reports.
Also, panelists agreed that sharing compliance reporting among other properties in a portfolio helps build competition between property management staffs and creates impetus to stay on top of their residents.
Daniels says Greystar has reporting calls each month and invites property managers to join and ask questions so they understand the importance of ongoing compliance.
“I think those calls have been effective for us,” she said.
Monitoring and enforcing compliance throughout the lease term
“We make renters insurance a requirement before someone can be put into the system, and it can’t be overridden,” she said. “Also, to make sure a policy hasn’t been cancelled, there are different reports we can pull from our property management system. We’re able to look ahead of that and monitor throughout the month.”
Executives say enforcing small fees written into the lease is a good way to maintain compliance. Daniels said it’s important to communicate with the resident up front that a fee could be assessed, and why, if renters insurance isn’t maintained.
“Money talks,” she said. “But it’s not the money; it’s that we want you covered. It’s educating the resident.”
Riggs said Continental Properties takes several steps to connect with residents who don’t comply, including notification by email, notices, even knocking on doors or during service calls.
Overcoming the myths about mandating renters insurance
Zacharias and Schnabel say that overcoming the challenges of mandating renters insurance ultimately comes down to a numbers game and responsibility of residents to protect not only their assets but the property’s. The sales pitch shouldn’t be construed as more money out of the resident’s pocket but a service that offers some pretty big protection.
“If you train your teams properly and present it properly, residents see a benefit to this,” Zacharias says. “It’s covering their stuff, and now they’re not on the hook for $50,000 when they accidently start a fire.”
Besides, residents should understand there is an obligation to the property owner.