Are you paying for your tenants negligence?

March 19, 2015

Irresponsible Tenants Cost you more than you think!!

An irresponsible tenant is costing you more than just the disturbance they may be causing in your apartment building. Such tenants can cause other tenants to move out and advise others to not move in, they cause property damage to your building, they are most likely to sue you, they are costing you extra money with your insurance.

Yes there are the obvious things that you can do to reduce the likelihood that you end up getting this type of tenant but there is one more item that you can do that you may not have considered. Require all of your tenants to carry a renters insurance policy. Such a policy will not only protect the tenant for damage or theft of his stuff but it will protect you the property owner for accidental damage to your property. Examples of the type of damage that would be covered are: Tenant overflows a tub or sink and causes water damage, tenant puts holes in walls when moving furniture in/out of the unit, tenant causes a fire when cooking. Here is the beauty of renters insurance, if the tenants policy is paying for these damages then your apartment building insurance policy or Landlord insurance policy isn't paying for the damage.

Do you know what happens when your apartment building insurance policy isn't paying for these types of losses? Your insurance company is paying less in losses and that means that you will save money on insurance in the long run. The potential savings comes in 3 possible ways: First, some insurance companies are giving an up front discount if you require all tenants to have an insurance policy and your have a system to keep on top of this (most property owners use a 3rd party to manage this for them); Second, over time the insurance company will reduce rates for you due to your excellent loss experience. Third, I have seen time and time again where an insurance company cancels an insurance policy because of a couple losses, once this happens you now have to find a new policy when your loss history is at its worst and often the cost is 2 or 3 times what you were paying. Had even one of those losses been covered by a tenants policy you would have likely avoided a cancellation.

What many apartment building owners don't realize is that all of the large Multifamily property owners have know the advantages to requiring tenants to have insurance and they have been doing it for years. They are paying less for insurance than you are and you are trying to compete with them for tenants. Yes I have heard all the excuses from landlords: My tenants would move out, they can't afford it, new tenants won't move in, Etc, Etc. The truth is that is all in your head! Tenants can purchase a renters policy for $10 a month and typically it ranges from that price to free. Yes the renters policy might not cost them anything!!! Many insurance companies are offering a 10% credit on the tenants auto policy if they have a renters insurance policy. So, if their car insurance is $1200 a year the tenant policy cost them nothing! If their auto policy is say $600 a year then the tenant policy would cost $5 a month. Yes your tenants can afford it.

If your current landlord insurance policy doesn't offer any discounts for requiring insurance give me a call. I can also provide a tenant insurance tracking program for as little as $6 per unit per year!

Call me if you would like to discuss any of these items.


Joe Hershey, CPCU, CIC