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Ensuring the First Layer of Protection if Renter’s Insurance Retention Fails

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A healthy apartment market means fewer occupancy challenges for most communities. With U.S. apartment occupancy at a near-record 96.3 percent, the potential risk of resident-caused damage by fire or any other type of destruction increases.

Renter’s insurance policies are peace of mind for not only residents but property management companies and owners. Yet apartment renters don’t always buy into coverage.

Some of the latest data suggest that about half of renters don’t insure their belongings in the places they rent. Most who don’t buy an HO4 policy – mostly commonly referred to as a renter’s insurance policy – believe it’s too costly. Some think policies cost $1,000 or more per year when the reality is often less than $200.

It’s now commonplace for properties to require renter’s insurance at lease signing. According to RealPage data, a renter’s insurance policy potentially saves the property an average of $32 per unit per year in the event of damage. Damages are covered so that the property typically doesn’t have to dip into its primary coverage which may come with a high deductible.

Just because a renter signs on with insurance doesn’t mean the policy will stay intact throughout the lease, says Rich Schreiber, RealPage Senior Vice President of Insurance. “Residents get lost and that leaves the owners and managers exposed,” he said at RealWorld 2019 during a live interview.

Insurance providers have begun offering commercial policies that overlap where lack of renter’s insurance can leave a property vulnerable. The extra protection covers property damage to units or common areas for which residents are legally liable, as well as for allowable events like fire, smoke, explosion, water damage, falling objects and more.

“What we do with our AssetProtect offering is we use a commercial policy to essentially blanket all communities,” Schreiber said. “Our focus is primarily on the owner’s bricks and sticks. It’s a uniform policy at a very low cost that generates ancillary revenue and has the participation of up to 100 percent.” Residents also have the option to cover their contents.

Policies are designed to meet the resident’s budget with low monthly premiums that are included in the monthly apartment charges.

“We’ve found that’s particularly attractive for owners that don’t want to use the HO4, they now have this option to satisfy their risk strategy,” Schreiber added. “We have very consistent coverage for all communities in all markets.”

LeaseTerm Solutions, which offers the policy, has been able to drive 100 percent coverage of all units within 12 months while providing additional revenue for the property.

Ultimately, covering gaps in renter’s insurance improves NOI and increases the value of assets by transferring the cost and risk of resident-driven exposures and potentially decreasing the property’s insurance premiums.

RealPage Vice President of Insurance Services Adam Falkauff, who joined Schreiber in July’s Facebook Live interview, said transferring that risk and cost relieves pressure on the property’s insurance policy and helps avoid potential premium increases.

“Owners don’t have to tap into their policy, come out of pocket for big deductibles, and be susceptible to rising premiums,” he said. “We all have cars and we know if you get into a bunch of accidents the price of insurance is going to go up. The same thing holds true at a community. So we help them to ensure they have that first layer of protection.”

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