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Now Is The Time To Examine Renters' Insurance

As published in by Carrie Rossenfeld
Jan. 03, 2018

SAN DIEGO—The recent wildfires throughout Northern and Southern California have had devastating consequences on both business and residents, so renters and landlords need to review their insurance policies, Sunrise Management’s CEO Joe Greenblatt tells The fires caused thousands of structures to be destroyed, dozens of deaths, more than 500,000 acres burned and billions of dollars in property damages.

Sunrise, a San Diego-based multifamily property manager with a portfolio of 13,000 units throughout California, Arizona and Nevada, experienced nine property fires across its portfolio in 2017, with fire destroying or damaging 84 units. We spoke with Greenblatt about why now is an optimum time to examine the value of and importance of renters’ insurance—for renters and landlords alike. Why are renters at risk?

Greenblatt: Many have suffered and will suffer from the damage or loss of their homes and belongings due to accidents and unexpected natural disasters. But renters, in particular, are at financial risk—especially if they lack insurance. And sadly, most do. According to the Insurance Information Institute, while 95% of homeowners have policies to cover theft as well as losses caused by fires, hurricanes and other natural disasters, only just over 40% of renters carry equivalent coverage. In addition to natural disasters, what are common causes of apartment fires?

Greenblatt: Many apartment fires are directly or indirectly related to resident behavior and are caused by cooking, overloading electrical circuits, space heaters or use of candles and tobacco. It is important to note that most apartment leases hold renters responsible for the full cost of any damage they cause to their residence. Yet it’s often challenging for managers or other residents, impacted by a fire, to collect on that obligation. And while our immediate concerns are fires, every year we also experience resident-caused flooding triggered by overflowing and forgotten sinks and bathtubs as well as accidental fire-sprinkler-system damage.

From a property owner’s perspective, these losses are expensive. Absent a renter carrying liability insurance, property insurance deductibles must be paid to remediate the losses, causing loss claims to drive up future insurance costs. Can you discuss the pros and cons of mandatory rental insurance?

Greenblatt: Renters’ insurance benefits the landlord just as much as it does the resident. As a result, multifamily owner/operators are increasingly on board with mandatory rental insurance—with more and more landlords making insurance a requirement of the lease, a practice we think is beneficial to both parties.

Over the last seven years, requiring renters to obtain and carry insurance has become an industry best practice. Typically, landlords require resident liability insurance- usually $100,000 in coverage—and also encourage residents to insure personal property for a minimum of $10,000.

While the cost of these programs is covered by the resident, rental insurance is relatively affordable. For under two hundred dollars a year, renters can cover their possessions, the cost of accommodations elsewhere if their home is destroyed and liability for on-site accidents.

The downside to mandatory renters’ insurance programs is the administrative burden. Renter compliance must be tracked and—under many programs—there can be gaps in coverage that may leave the owners/investors unprotected. The best programs can be consistently administered and include forced-place coverage that assures property owners there will be no gaps. Can you discuss benefits of administered mandatory insurance programs?

Greenblatt: More and more property-management companies now offer an administered mandatory-insurance program. Well-thought-out and designed programs are not overly burdensome to the on-site staff (administratively) and afford protections to owners/investors. Under these programs, renters always have the option of selecting their own insurance; however, they can typically buy liability insurance, as well as coverage for their personal property, at very attractive rates and pay their premiums with their rent.

Administered mandatory insurance programs can be even more beneficial to owners/investors since they can provide a modest revenue source as well as a potential reduction in insurance costs.

Ultimately, rental insurance provides residents—and landlords—with real value. For landlords, it offers added protection, minimizing liability and responsibility, and for tenants it’s an affordable safeguard, providing peace of mind and security.

With a 30-year background in the multifamily industry, Joe Greenblatt is the president/CEO of Sunrise Management, a San Diego-based firm which has specialized in the management of multifamily properties since 1978. The firm currently has regional offices in Sacramento, Las Vegas and Phoenix, with a portfolio of 13,000 units throughout California, Arizona and Nevada..

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