Magazine article Journal of Property Management

Policy Payoff

Magazine article Journal of Property Management

Policy Payoff

Article excerpt

Benefits of a Rental Insurance Requirement

A cigarette left burning near a couch...a heated curling iron forgotten on a bathroom vanity...a dinner left too long simmering on the kitchen stove. These all-too-common accidents waiting to happen caused by apartment residents can result in costly property damage--damage which, all too often, is left to the property owner to pay.

Until recently, once the smoke cleared in these types of resident-induced incidents, chances are that it was the owner who was left paying for the cleanup.

But that's changing.

Increasingly, in order to avoid getting burned, property managers are requiring residents to purchase renter's insurance as a condition of their lease.

Property owners and managers have discovered they need to take active steps to protect themselves from liability losses due to resident negligence. One of these steps is requiring residents to purchase renter's insurance to cover their contents or personal property within the unit, as well as liability losses in cases where they are deemed negligent.

As real estate managers, we understand that from time to time there will be fires, tornados and even the occasional burst water pipe or heater, unexpected events that can cause people to lose their rental homes for a period of time. While there is little we can do to prevent most of these occurrences, there are things we can do to protect our client, our customer and our firms.

In the commercial management arena, it was commonplace for tenants to be required to provide property and liability insurance. Until about 1995, however, residential real estate managers and owners merely suggested that residents purchase renters insurance.

EpiCity Real Estate Services, AMO[R], implemented a renter's insurance requirement after confirming that such a policy was permissible and enforceable. (As long as the property management firm does not discriminate, such resident insurance policy requirements are legal.) While prior to requiring renter's insurance the firm had experienced few losses, shortly thereafter, during a 24-month period, it experienced six fires affecting 14 residences; each one resulted from resident neglect. Altogether, the losses totaled nearly $300,000 and two of the fires accounted for nearly two-thirds of the total loss. In each case, the accidents resulted from either a grease fire in the kitchen or an unattended candle left burning in the dwelling.

The ultimate goal of requiring renters' insurance is to mitigate difficulties for all concerned in dealing with these situations. …

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