Playing it Safe

Most apartment communities are now advocating renters insurance for all residents.

People want to feel as if they are safe and protected, so it’s important for a management company to explain to its residents the value of renters insurance. Not everyone moving in will understand why it’s necessary, and it’s up to those running the community to explain how their belongings will not be covered in the event of a fire, theft, flood or other catastrophe.

“Many tenants believe that a landlord will cover their belongings and that’s not the case, so you end up with an awful lot of bad will because of miscommunication or misunderstanding,” says Jesse Holland, CPM and president of Sunrise Management and Consulting in Albany, N.Y. “For anyone who moves in, we stress the importance of renters insurance.”

While none of the 1,500 units at the properties Sunrise manages require renters insurance, it does strongly recommend it and helps lead its apartment residents on the right path. There are flyers from different companies at the rental desk, options are stated in its handbook and rulebook, and everyone on staff can help put people in touch with companies.

The reason it’s not required, Holland says, is because, administratively, it’s a nightmare. Also, such a requirement is ultimately another hurdle in the way of getting people to sign a lease, and it seems unfair to force people to get something they might not want.

One exception to the rule is that its communities will require renters insurance if someone has a waterbed or a certain breed of animal, like a pit bull, to safeguard ownership for any damage that may occur.

Kevin Huss, vice president of revenue at Resource Residential in Philadelphia, says his company provides residents with the necessary collateral that highlights the benefits of coverage at the point of sale.

“This helps residents make informed decisions. We stress that accidents can happen, and even though they may exhibit good safety habits, they unfortunately will not be able to control the actions of their neighbors,” Huss says. “The higher the adoption rates, the less exposure we have of filing claims against our own property insurance. In the long run, this will reduce rates and increase the property’s profitability.”

Diana Pittro, EVP with RMK Management Corp. in Chicago, says the company no longer gives residents the option, as it has made renters insurance mandatory for the past five years for all of its 10,000 units at 31 sites.

“Anyone moving in or renewing is required to have a certificate now,” she says. “You would never drive without insurance—it is important to have it just in case you need it.”

The decision was made to do this, she says, because it was simply good business sense. To help, RMK Management Corp., worked with a group of local insurance companies to present some favorable opportunities for its residents.

“It’s not an expensive proposition—usually around $10 to $12 a month—so it would be silly not to do it for that small amount, and it can even be rolled in with your car insurance,” Pittro says. “Unfortunately, fires do happen, and damage done by a sprinkler and fire do a lot of damage very quickly.”

To ensure that people are really compliant with the rule, the company has a software program that is linked with the residents’ policies so if someone cancels, an email will be sent alerting them. Residents are then given a 10-day warning to get covered again or be thrown out of their apartment.

Heidi Much, vice president of risk management at Village Green, doesn’t believe most residents in her company’s 162 communities need convincing to buy.

“Renters are sophisticated today, and they have sophisticated belongings, so protecting their belongings is an easy sell on why renters insurance is a good idea,” Much says. “Most people realize it may not be themselves that cause an incident—but a neighbor, and they want to be protected.”

Village Green’s compliance ratio of those who carry renters insurance is approximately 90 percent, as it’s been requiring new renters to have it since 1993. For Resource Residential, applicants have the expectation to pay for renters insurance before they visit and tour its properties.

One challenge with requiring renters insurance is that it’s hard to stay on top of everything. Huss has learned of a number of residents who, after they move in, cancel coverage a week or two later, and it’s often not worth the trouble to confront them.

“Sometimes we are notified by a third-party insurer, but most of the time we do not know,” he says. “Addressing this challenge will be the key to fine-tuning our program.”

According to Holland, another insurance residents should consider buying is flood insurance. It’s not required in most places, and most tenants don’t think about it. But if a flood happens, a normal renters insurance policy may not be enough.

“Not every company selling renters insurance includes coverage for water infiltration,” Much says. “We focus on educating our residents every day so they know they are protected.”

The industry as a whole is embracing the concept of educating tenants about renters insurance, which creates applicant awareness and makes residents understand its value more clearly.