Multi-Family
Friday, September 1 2006
Published on AllBusiness.com
Despite a rise in multi-family property' insurance rates, many owners have been unwilling to mitigate their risk by passing it on to their tenants. However, recent studies have shown that renter's insurance reduces owner costs and that requiring it as a lease prerequisite does not deter tenants.
One of the leaders in the push for renter's insurance requirements has been LeasingDesk Insurance Services, which recently commissioned a survey of senior-level executives at 47 small, medium and large multi-family firms that manage a combined total of 900,000 units at 3,500 multi-family properties nationwide. The survey, conducted in November and December of 2005 by SatisFacts Research L.L.C., revealed that multi-family property owners that implement and enforce renter's insurance requirements reduce financial costs related to renter-caused property damage by 79 percent.
In the past, multi-family owners could take out insurance policies with low deductibles at a relatively low cost. The volatile insurance market has seen rate increases to the extent that many owners have foregone low deductibles in favor of lower premiums.
"Until a couple of years ago, (insurance companies) offered more coverage with less cost as a result of competition," said LeasingDesk president & CEO Dirk Wakeham. "But now they have whittled away the coverage and pushed the first tier of risk down to the owner."
Required renter's insurance that covers resident-caused damage can close that gap that results from higher owner deductibles. The survey revealed that while 55 percent of respondents track the number of resident-caused damages that fall below the property's deductible and 43 percent of the total also cite increased insurance rates over 2004, only 25 percent of the owners manage the risk by requiring renter's insurance.
According to a report by Joshua Tree Consulting that analyzed data from the National Multi Housing Council, American Insurance Association and SatisFacts, most of those reluctant owners cited fears that doing so would put them at a competitive disadvantage in the market.
Wakeham said the key to successfully implementing such requirements lies in the way owners explain it to tenants. "Most owners (who) have sold it (successfully do so) under a 'good neighbor' policy, where it's seen as protecting (the tenant) from (damages caused by) other tenants," he said. Tenants are also more apt to see insurance as an asset when they realize that it allows them to be compensated for stolen items, the most common resident loss claimed.
According to the Joshua Tree report, those owners that do require renter's insurance said it has not adversely affected their ability to rent units, even in competitive markets. The SatisFacts survey supports these findings, with 77 percent of owners with mandatory renter's insurance practices reporting that implementation was "easy" or posed "manageable challenges."
?Adam Perrotta
One of the leaders in the push for renter's insurance requirements has been LeasingDesk Insurance Services, which recently commissioned a survey of senior-level executives at 47 small, medium and large multi-family firms that manage a combined total of 900,000 units at 3,500 multi-family properties nationwide. The survey, conducted in November and December of 2005 by SatisFacts Research L.L.C., revealed that multi-family property owners that implement and enforce renter's insurance requirements reduce financial costs related to renter-caused property damage by 79 percent.
In the past, multi-family owners could take out insurance policies with low deductibles at a relatively low cost. The volatile insurance market has seen rate increases to the extent that many owners have foregone low deductibles in favor of lower premiums.
"Until a couple of years ago, (insurance companies) offered more coverage with less cost as a result of competition," said LeasingDesk president & CEO Dirk Wakeham. "But now they have whittled away the coverage and pushed the first tier of risk down to the owner."
Required renter's insurance that covers resident-caused damage can close that gap that results from higher owner deductibles. The survey revealed that while 55 percent of respondents track the number of resident-caused damages that fall below the property's deductible and 43 percent of the total also cite increased insurance rates over 2004, only 25 percent of the owners manage the risk by requiring renter's insurance.
According to a report by Joshua Tree Consulting that analyzed data from the National Multi Housing Council, American Insurance Association and SatisFacts, most of those reluctant owners cited fears that doing so would put them at a competitive disadvantage in the market.
Wakeham said the key to successfully implementing such requirements lies in the way owners explain it to tenants. "Most owners (who) have sold it (successfully do so) under a 'good neighbor' policy, where it's seen as protecting (the tenant) from (damages caused by) other tenants," he said. Tenants are also more apt to see insurance as an asset when they realize that it allows them to be compensated for stolen items, the most common resident loss claimed.
According to the Joshua Tree report, those owners that do require renter's insurance said it has not adversely affected their ability to rent units, even in competitive markets. The SatisFacts survey supports these findings, with 77 percent of owners with mandatory renter's insurance practices reporting that implementation was "easy" or posed "manageable challenges."
?Adam Perrotta
