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Escalating Rental Market Calls for Innovative Coverage

February 13, 2019
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Escalating Rental Market Calls for Innovative Coverage

The demand for rental housing continues to grow at rates unseen since 1970 when baby boomers came of age, according to a Pew National Report published in April 2018. The same study reveals that 43 million American households lived in rental property in 2015, an increase of 9.3 million since 2004.

While this is great news for landlords who often find more tenant candidates than available units, it also increases the risk inherent in tenant liabilities. Oswald understands the risks faced by middle market and large market landlords and management companies, especially in these high-demand times. Our solution simplifies the challenges and offers the right protection.

Traditional Renter’s Insurance Limitations

Enforcing and managing traditional renter’s insurance requires dedicated time and specialized oversight. It further becomes a management burden for larger portfolios, especially when factoring in tenant turnover between 20-40%. This is a reactionary position in which landlords may find themselves. Sometimes landlords are successful in getting the tenant to procure and obtain insurance for the first year or two, but fail to consistently (and easily) track it. We have seen instances where a tenant produces an insurance policy as required at the time the apartment unit is leased, but cancels the policy two days later. Or the tenant may simply let the policy lapse. In large rental complexes, these instances can easily fall through the reporting cracks. Either way, the coverage is no longer in effect and the unprotected loss can occur.

Traditionally, typical insurance requirements within a standard residential lease include $100,000 of liability along with coverage for their personal property. In theory, landlords view the liability limit as if they have rights to this coverage to protect them from tenant incurred liability. While this is the intent, the reality of how coverage may respond can differ depending on scope of claim, leaving landlords with a much different outcome.

As a result, these limitations present landlords with a few challenges:

  • CHALLENGE #1 – In order for the tenant policy to respond to a claim, the damage must first be proven beyond a reasonable doubt to have been caused by the tenant.
  • CHALLENGE #2 – The first named insured on the renter’s policy is the tenant, not the landlord. This can present challenges because the insurance company essentially creates a conflict of interest between the landlord and tenant, and will do everything it can to create doubt so the insurance company doesn’t have to pay the claim.
  • CHALLENGE # 3 – Take the example of a common loss – a grease fire or an overflow of water, which causes damage to the tenant’s unit, along with five other adjacent units as well as the building. Dividing the $100,000 coverage among the claimants doesn’t go very far, and does not meet initial coverage expectations of the landlord.

Lessening the Burden and Covering the Risk

Technology continues to make inroads into the insurance industry, and addressing and efficiently
managing tenant liability becomes a much easier task today than it was just five years ago.

Oswald has created a leading-edge program to address the shortcomings that adversely
impact landlords. Known as Tenant Liability Insurance, the program is gaining national traction
for several reasons.

  • The policy can be offered as stand alone or in addition to traditional renters’ insurance. Renters
    wishing to have full coverage can have both. Those who do not find value in carrying traditional
    renters’ insurance can still satisfy the insurance requirement with Tenant Liability Insurance.
  • The renter can be automatically enrolled in the program at the time the lease is signed.
    Online enrollment takes literally five seconds.
  • The landlord is named insurer (rather than the tenant). In the case of the earlier grease fire
    example, the landlord would be paid first. Any leftover claims funds can be distributed by the
    landlord to offset damage caused to tenants.
  • The program is customizable to a rental community. All units in a community have the same
    coverage amounts, set by the landlord.
  • The goal is to offer the coverage at no cost to the landlord.
  • Tenants benefit because they don’t have to pay a full year’s of premium. Premium payments
    are made on installments, and the per-month cost to the tenant is significantly below
    traditional sources of renter’s coverage.

Landlord Coverage Comes with a Cost

In addition to insurance carried by renters, landlords carry separate policies to protect their interests. These coverages can close the financial gaps left by renters’ insurance. However, the policies include high premiums and sometimes significant deductibles. For instances where tenants do not carry insurance, or their coverage does not address specific basic perils, landlords will be left with assuming these claims onto their policies or their own reserves. These claims can prove very costly, with lasting financial impact to the landlord. The compounded impact of paying out-of-pocket to cover deductibles in addition to having their policies at risk of increased cost due to claim frequency is not a favorable position.

Landlord Rewards

In addition to landlord-first coverage, tenant liability insurance offers landlords the opportunity to create an alternative income stream from their existing portfolio.

As an example, an owner with 10,000 units enrolls 80% of the complex’s tenants. These 8,000 insureds pay a monthly premium to the landlord. The monthly premium includes a premium to the insurance company and an administrative fee, paid to the owner. Oswald will also work with the insurance company to provide profit sharing opportunities for the owner based upon profitability and volume. We make it easy with our proven onboarding program. Training, scripting and staggered implementation guarantees that integrating Tenants Liability Insurance into your communities will help you have more control, better coverage and keep and make money.

CLICK HERE to learn more about Oswald’s Real Estate Risk Solutions.


For more information, contact:
John Mark Tichar
Vice President
216.367.8787
jtichar@oswaldcompanies.com

Note: This communication is for informational purposes only. Although every reasonable effort is made to present current and accurate information, Oswald makes no guarantees of any kind and cannot be held liable for any outdated or incorrect information. View our communications policy.

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