When it comes to property management, getting a handle on your tenants’ renters insurance is key to protecting your business. According to recent data, 45% of renters cancel their insurance coverage during the term of their lease, removing the protection their landlord or property management depends upon. That’s why many landlords and property managers require their residents to list them as an interested party on their policy.
Although this designation enables property managers to get some visibility into their residents’ coverage, the system that most renters insurance companies follow includes some key limitations that make monitoring difficult.
Let’s talk about the ins and outs of the interested party designation, including what it means, the benefits and downsides, and some helpful alternatives.
What is an Interested Party on Renters Insurance?
An interested party, also known as “additional interest” or a “third-party designee,” is someone who will receive notifications about an insurance policy outside of the policyholder. For renters insurance, this is typically the landlord, property manager, or anyone who has a vested interest in the policy’s status.
To add an interested party to your renters insurance, you’ll have to go through your carrier and follow their protocol. While some allow policyholders to add an interested party online or through an app, others require you to call or mail in a form.
Depending on the insurance company, an interested party might receive limited updates about changes made to coverages or limits, or they may only find out if the policy was canceled. To find out which notifications to expect, you’ll need to reach out to the carrier directly.
Additional Interest vs. Additional Insured
When it comes to understanding renters insurance, it’s easy to get confused between additional interest and additional insured.
An interested party, also known as additional interest, does not receive coverage under the policy on which they’re listed. While they’re kept in the loop about limited updates in some cases or cancellations, they’re unable to file their own claims. For that reason, adding an interested party to renters insurance does not incur a fee or impact premiums for the policyholder.
On the other hand, designating someone as an additional insured extends the coverage of the policy to that individual. Since this broadens the scope of the insurance policy, it typically results in an increase in premiums. Tenants will often use this designation for other residents in the unit, such as live-in partners. Not only is it not recommended to be listed as additional insured on your tenant’s policy, but most carriers won’t even allow it.
Why Landlords Ask to Be Listed as an Interested Party
Landlords and property management companies have a vested interest in safeguarding their investment when renting out properties, which is why enforcing renters insurance is a crucial step in onboarding new tenants.
When leasing out residential space, landlords often require tenants to get certain coverages:
- Personal property coverage: Provides reimbursement for tenant belongings lost or damaged due to covered perils, often including vandalism, fire, and theft
- Liability coverage: Pays for legal fees, medical expenses, and damages from lawsuits in the case of bodily injury or property damage to other people or property
- Additional living expenses coverage: Covers the cost of temporary housing and necessities if the unit becomes uninhabitable
Many landlords believe that by being listed as an interested party or additional interest, they can ensure that their tenants maintain adequate insurance across all of these coverage types. Unfortunately, due to the limitations of the interested party designation, that’s not always the case.
Potential Downsides of Being an “Interested Party”
Mailbox overload
The constant stream of letters you’ll receive as the interested party on a renters insurance policy can quickly become a headache, especially when you’re the main point of contact for a building’s worth of tenants. Many property managers are so overwhelmed by the piles of mail they receive that they have to choose between spending hours a week sorting through update letters or tossing them– at which point it’s as good as receiving no updates at all.
Delay in updates
Getting informed about your tenants’ policy changes is one thing, but you also need to act fast to eliminate risks to your business. Despite the promise of staying informed, additional insured processes often leave a critical gap between a tenant’s policy cancellation and the receipt of the notification.
In some cases, a landlord won’t even find out an update was made to the coverage until 60 days after it was canceled. This lag leaves the resident– and, in turn, the landlord– vulnerable to significant losses for months.
Limited notifications
As an additional interest, you may not receive all of the alerts you expect, particularly concerning policy updates. Oftentimes interested parties will be notified about policy cancellations, but changes such as coverage limit adjustments might slip under the radar.
This means that if a tenant lowers their coverage below the required threshold, you might not find out at all, leaving potential gaps in protection and increasing the risk of unforeseen financial liabilities.
To top it all off, after all of these inconveniences, it’s still up to the property management company to get the tenant to reinstate his or her coverage if it falls out of compliance. Thus begins a slew of back-and-forth emails and reminder messages until your resident reactivates their policy.
Related: The Pitfalls of Additional Interest: Why It’s Not Enough to Protect Your Property
Alternatives: How to Monitor Renters Insurance without the Headache
For years, additional interest was the only way to gain visibility into your residents’ renters insurance. Fortunately, with today’s technology, there’s an easier way to monitor coverage and protect your business.
CheckMy Resident is the only automated insurance verification process that provides real-time transparency for landlords and property managers.
With its monthly monitoring option, you can also find out if the policy ever falls short of your set requirements, without any additional work on your end. CheckMy Resident’s AI-driven adequacy engine verifies whether the tenant’s policy is active, accurate, and adequate. If it’s not, embedded insurance options help them buy affordable and easy-to-purchase coverage on the spot.
Want to get year-round protection without the additional interest letters? Learn more about how CheckMy Resident can work for your business.
