Helping Tenants Understand The Benefits of Having Renters’ Insurance
Only a third of all tenants have some kind of insurance to protect themselves from calamity in case their possessions go up in smoke or they’re flooded out when it rains or their children burn down the house while playing with matches. Your owners’ policy would pay to repair or replace the building if something were to happen, but your policy would not cover the tenant’s possessions nor the tenant’s liability if they were found to have caused damage to the property.
This state of affairs raises any number of questions, and you should have some answers so you can help your tenants understand renters’ insurance and buy it if they wish.
Why do so few tenants purchase renters insurance?
- They erroneously believe that their landlord carries insurance which will cover them and their belongings.
- They have never given it even a first thought because nobody has ever made them aware of renters insurance.
- They think they can’t afford it.
- They think their assets are too insignificant to be concerned about.
- They’d rather gamble that the premiums which they would pay over time would exceed whatever benefits they would receive.
Why should you as a landlord even be concerned about whether your tenants have a renters’ insurance policy?
- You should show a positive, caring attitude toward your tenants whenever you can.
- Tenants who have insurance are less likely to sue their landlords after a tragedy than tenants who don’t have insurance. Tenants who have insurance don’t have to turn to you for compensation. They turn to their own insurance company for reimbursement.
What does a renters’ policy cover (some offer fire coverage only, while others offer general coverage, including fire, earthquake, and flood coverage)?
- It may cover tenants’ personal goods which are damaged or stolen on the premises.
- It may cover losses to their goods when they are off the premises, such as gold clubs or a camera stolen out of their locked car.
- It may cover them in case someone holds them up, forges their checks, or steals their credit cards.
- It may cover personal liability in case they are negligent as tenants and cause damage to the dwelling.
- It may cover personal liability for non-auto bodily injury claims brought by others.
Where can they buy a renters’ policy?
- Almost all the big general insurance companies sell it – State Farm, Allstate, Safeco, Farmers, etc.
- Tenants might start by asking the company which provides their car and home insurance policies. Always important to compare renters’ insurance quotes before purchasing a policy.
How much does it cost (rates vary by regions; one company has different rates for nine different regions in a single state)?
- Typically a renters’ policy will cost around $25 per month for $25,000 worth of coverage and a $250 deductible. Personal liability on such a policy is $300,000.
- Policies which offer minimal coverage cost as little as $100 per year.
Can they pay for it in installments?
- Most insurers offer a variety of payment plans – monthly, quarterly, semi-annually, and annually. Ask about their installment plans when you are getting renters’ insurance quotes to compare policies. There may be a service charge for the extra paperwork in billing for installment payments.
What discounts are available?
- Discounts are available for those who have any combination of the following – dead bolt lock, smoke alarm, fire alarm, sprinkler systems, or fire extinguisher.
How can you best make your tenants aware of the benefits of a renters’ policy?
- Mention when you first rent to them that they should secure a renters’ insurance policy if they want coverage, and remind them of their exposure to risk once in awhile.
- Make them aware that their possessions are indeed worth something, probably more than they think.
- Tell them that they would be liable if they caused a fire at the property or building, and the place burned down. A renters’ policy would cover them, and also includes much broader coverage than they might think.
Are there any ways you can help them get a renters’ policy?
- You can buy a policy for them in their name and include its cost in their rent. Remember that it becomes their policy. Should they move out six months after you the paid annual premium and ask the company for a refund, they will get the refund, not you, because the policy has to be in their name.
Overall, be prudent whenever you buy insurance affecting your income property business. You’ll save on the premiums and you’ll protect your assets. Making your tenants aware of the benefits of having a renters’ policy is just one way to ensure your business, homes, and buildings are protected.
Getting Good Tenants
Vacancy times are times which try landlords. They’re loss-of-revenue times, doubtful and working times, and if you don’t own many properties, each vacancy represents a high percentage of all your rentals and you are likely to be especially anxious to get that vacant rental filled. Be anxious, but don’t be hasty. You want a smooth operation, one which won’t continue to be trying when there’s no vacancy at all.
The most important factor in the smooth operation of rental properties is getting good tenants. If you become adept at this, all your landlording troubles will be little ones. No matter what procedure you follow for selecting tenants, if it’s working for you, keep at it. No one can argue with success. But if you should have reason to doubt the effectiveness of your tenant selection procedure or need an expert’s opinion, consider learning from the following.
The Ten Steps To Picking A Good Tenant
Just as anyone can pick a horse to bet on in a race, anyone can pick a tenant, but picking winners isn’t easy. It requires a lot of diligence and patience, as well as a little luck and some good intuition. Fortunately, though, the odds improve exponentially if you follow these tens steps, which are arranged chronologically.
- Prepare the dwelling for occupancy.
- Pre-qualify the prospects.
- Show the dwelling.
- Accept and scrutinize all applications.
- Check references and qualify the applicants.
- Visit applicants’ current home.
- Review your rules, requirements, and policies.
- Fill out and sign the Rental Agreement.
- Request all money or a deposit.
- Create a record of the dwelling’s condition and contents before occupancy.
These ten steps are hardly what one might call difficult, but they do require time and attention, some of them more than others. Take the time and give them the attention, some of them more than others. After the first seven steps, you might choose to reject the prospective tenants, and you shouldn’t be afraid to do so. You are not obligated to rent an available home to the first person who expresses an interest in renting it. I repeat, you are not obligated to rent an available rental dwelling to the first person who expresses an interest. Keep looking until you are thoroughly satisfied that you have found an applicant who will be a good tenant for your building and for you, someone with whom you might have a reasonably friendly and enduring relationship.
Exercising Discrimination - Legally
Be as discriminate as you can possibly be in your selection, but by all means, DO NOT discriminate based on race, color, religion, sex, national origin, age, or physical handicap. Such discrimination is illegal throughout the United States, as a matter of Federal Law. In addition to federal discrimination criteria, some regions have specific laws prohibiting discrimination regarding marital status, sexual orientation, source of income (occupation), personal appearance, political affiliation, place of residence, place of business, matriculation (student status), and family responsibilities. Other regions have less specific but more encompassing anti-discrimination laws which prohibit discrimination in rental housing unless it is based on legitimate business grounds.
Now with all these discrimination categories to worry about, you might think that you would have to rent to the first person who expresses an interest in your vacant home rental just to avoid a discrimination lawsuit. What is left to discriminate about anyways? A lot actually, such that you may still discriminate based on your tenant’s ability to pay, willingness to pay, past record as a tenant, pets, waterbeds, number of vehicles, types of vehicles (you may not discriminate against motorcyclists, but noisy ones are another matter), recommendations, number of co-tenants (even though you may not discriminate against children, you may still limit the number of people you will allow to occupy the premises), intelligence, honesty, attitude (use care with this one), smoking or drinking habits, permanence, noiseness, cleanliness, etc.
Overall, don’t worry about anti-discrimination laws too much. You should always be able to find a legal reason not to rent to those who are objectionable. Set your own standards well within the law, and then set about getting good tenants you can work with. Your standards for a particular rental might look like the following:
- Gross income - needs to be four times rent.
- Income stability – needs to be at least six months with the same employer or source of income.
- Assets – fives time rent (bank account and/or automobile equity)
- Credit – established, nothing negative
- Rent punctuality – prompt, never late
- Pets – none
- Waterbed – one queen-size OK
- Vehicles – one car, no motorcycles louder than an automobile
- Personal recommendations – one available (preferably local)
- Number of tenants – maximum of four
- Intelligence – average or above
- Attitude – cooperative
- Smoking – no
- Drinking – moderation
- Permanence – at least six months in each of last two residences
- Cleanliness – average
Naturally some of the standards you use are relative to a given dwelling, to you, a particular state and municipality, and others are commonly accepted rules. Be reasonable in determining standards or you’ll never find anyone you can rent to.
One of the most important factors to consider is an acceptable number of occupants based on the size of the home. A reasonable guideline to follow is one fewer than the number of bedrooms available. Exceeding this number increases the population density to a point where maintenance and repair costs increase considerably. Floors show more wear, toilets flush more frequently, doors swing open and closed, faucets, switches, outlets, windows, heaters, garbage disposers and all the other parts of a rental home just get a lot more use and hence wear out more quickly. Although HUD, otherwise known as the US Department of Housing and Urban Development, has its own estimates, fortunately, you don’t need to agree with them and follow their figures. Unless local housing regulations state otherwise, this is purely what you, as a landlord, are comfortable with, assuming you don’t make it overly restrictive.
One Los Angeles landlord restricted his rental homes to one occupant per bedroom and ran afoul of the Fair Employment and Housing Commission for being too restrictive. This same landlord would make no exceptions to his occupancy guidelines when children were involved, but he would make exceptions when adults were involved. You can see why he ran into trouble – he was discriminating against children, and that’s against the law.
Some additional basic guidelines which should help landlords avoid trouble are the following: 1) No child will share a bedroom with the parents; 2) No more than two children will share a bedroom; 3) A child six years or older will not share a bedroom with a child of the opposite sex; and 4) A child ten years or older is entitled to a separate bedroom.
Home Insurance and Refinancing Mortgages For Landlords
For landlords, the cost of a mortgage and home insurance are business expenses, and therefore affecting their profits and cash flow. Find and compare home equity, refinance rates, and home insurance quotes to make sure you are getting the cheapest quotes and working with a top homeowners’ insurance company. National Lender List helps homeowners and landlords compare home insurance quotes, mortgage rates, and home loans to find the most affordable home insurance and the best mortgage rates. Also save on auto, health and life insurance quotes with our partner sites.
Get more details on The Ten Steps To Picking A Good Tenant.
My Rights, Obligations, and The Art of Negotiation With Homeowners Insurance
As the policyholder, only you can make sure that your insurance company lives up to the obligations under the policy or contract. It is recommended that you do so based on a strong conviction that fair dealing, quality workmanship and ethical business practices benefit the insurance industry just as they benefit the public. Your homeowners’ insurance policy is a contract between you and a financial institution that is not in the emergency service business. The contract entitles you to certain rights and imposes obligations on both you and your home insurance company.
- You may obtain emergency services to safeguard your property from further damage after a loss, and you may be fully compensated for the cost of such services. In fact, after a loss, you have the obligation to safeguard and mitigate your property from further damage. Your insurance company may not be liable for additional expense if you fail to provide such protection. This is called mitigating your damages.
- You have the right to have a professional loss consultant, or public adjuster, lawyer, etc, represent your interests and guide you in the presentation of your claim to the insurance company’s adjusters (at your expense).
- If you have secured adequate coverage, you should be entitled to be paid for the market value of fully restoring your property to its pre-damaged condition. However, you are not insured for the repair of unrelated problems, code deficiencies or prior damage.
- You are entitled to employ a full-time restoration professional who is licensed, insured, of good reputation, and can demonstrate his/her capabilities, availability, skill, and experience in insurance damage repair.
- The repair contract and its performance is strictly between you and the contractor. Generally, your insurance company does not warrant or guarantee the performance of any firm you hire. So be sure to have the contractor put any agreement into writing.
- You are entitled to materials and workmanship fully equivalent to your existing installation in like kind and quality. The home insurance company has no obligation to improve your existing installation.
- You are not required to accept the lowest bidder. Nowhere in your policy do the words “cheapest”, “low”, or “low price” appear. However, repair rates should correspond to prevailing standards in your area for work of good quality.
- Before work begins, you entitled to receive from both the adjuster and contractor, a detailed listing of the scope of repairs and quantities of materials to be provided. Provisions for hidden or latent problems relating to the damage should also be spelled out in as much detail as possible.
- You are entitled to a contract that provides all federal, state, and local requirements for construction work. However, you must be familiar with these requirements in order to enjoy the protection the law provides.
- If there is a disagreement between you and the home insurance company which cannot be resolved, you are entitled to request arbitration and/or appraisal subject to the terms of your policy. The standard policy spells out the procedures for settling differences without resorting to a lawsuit.
- The insurance company must pay you within the time specified in the contract. State insurance regulations vary with respect to the time requirements. The “time” clause is designed to prevent insurance companies from using delay and/or personal hardship as a tactic to compel a lower settlement. However, the policy also has time requirements for you, the policyholder, within which you must prepare and submit your “Proof of Loss” paperwork. Know about these in advance so that you can be in compliance.
The Art of Negotiation
Negotiating a settlement with an insurance adjuster demands a business-like attitude, a good understanding of the claims process, and preparation. To prepare for such negotiations, there are three things to remember: know your rights, have thorough documentation, and be able to verify your claim. By being prepared in this way, your negotiating skills will be utilized most effectively.
The dynamics of good negotiation are characterized by six interrelated elements: preparation, common sense, objectivity, principle, communication, and compromise.
- Preparing is a must! Have all your documentation close at hand in order to substantiate your claim.
- Common sense or good sound judgment will always be your best ally. Recognize what is relevant vs. irrelevant, material vs. immaterial, fact vs. fiction.
- Be objective. Objectivity is the concentrated effort to see things clearly and without bias or prejudice. Be being objective, you can easily identify whether the adjuster’s statements are made in good faith. How do you maintain this objectivity? The most effective way is by sticking to the relevant issues of the claim, recognizing how your views are similar or dissimilar to the adjuster’s, avoiding the sway of emotion or pressure, not relying on unsubstantiated statements, and verifying the adjuster’s statements through qualified sources. At times, it can be very challenging to maintain an objective attitude while negotiating. Your objectivity will be borne out by your open-mindedness toward the issues and your ability to recognize the adjuster’s perspective.
- When settling your claim, use a principled approach. Be sure the adjuster is maintaining the professional standards his/her insurance company advertises. Be straight-forward in your communications and do not become emotionally affected by unreasonable assertions. Never yield to pressure, intimidation, evasion, or unreasonable negotiation procedures.
- Effective communication is a product of accessibility, having a positive attitude, and concentration. Accessibility is maintained by first finding out the adjuster’s daily routine. Adjuster’s work schedules are open. They do not punch a time-clock and are usually available at any reasonable hour. Speak optimistically as though your every statement is simply a breath away from happening. Show confidence, carry a look of success, and espouse an attitude that the claim will be resolved only through fairness, honesty, and reasonableness.
Home Insurance Quotes, Mortgage Interest Rates, and Home Loans
To protect yourself after negotiating a claim from your home insurance company, find and compare home insurance quotes to make sure you are getting the best rates and working with a top homeowners insurance company. Sometimes after a claim, your insurance rates may increase, and you will be ready to negotiate a lower rate if you've done your research and compared multiple home insurance quotes and companies. National Lender List helps homeowners and landlords compare home insurance quotes, mortgage rates, and home loans to find cheaper home insurance and the best mortgage rates. Also save on auto, health and life insurance quotes with our partner sites.