With 84% of multifamily communities requiring renters insurance, it’s clear that the majority of property managers recognize the value of ensuring their residents are protected from risk. However, the way this requirement is enforced varies widely across residential rentals. Many leasing offices verify insurance by collecting potentially outdated documents, while others don’t request any type of proof at all.
With property damages due to resident negligence adding up to an estimated $1.2 billion per year, the cost of tenant non-compliance is significant. That’s why insurance verification is sparking conversations across the residential rental industry, with many starting to rethink their processes to maximize protection.
Let’s go through how to set up an insurance verification process that protects your business from move-in to move-out.
Table of Contents
1. Require Renters Insurance In Your Lease Agreement
When: At Lease Signing
If you want to make sure that your residents get renters insurance, you need to include it as a requirement in your lease. That way, you can establish specific contractual obligations, potentially entitling you to legal recourse if sufficient coverage isn’t in place.
When adding renters insurance to your lease, you’ll want to consider the details of your requirements. This may include key components such as:
- Required term: Specify that tenants must maintain active renters insurance for the entire duration of their lease agreement.
- Minimum liability limits: Set clear minimum liability coverage limits for your tenants’ policies. Consider requiring at least $100,000 to $300,000 in liability coverage to adequately protect your property and mitigate potential risks.
- Verification requirements: Establish a clear protocol for verifying tenants’ insurance policies. Define when and how you’ll check that their coverage is active and adequate throughout the lease term.
- Potential consequences: Outline potential penalties for non-compliance, ensuring they align with local laws and regulations. Consider including provisions for landlord-placed insurance policies charged to the tenant if they fail to maintain adequate coverage.
Here’s an example of an apartment lease* from one of the largest property management companies in the multifamily industry:
- INSURANCE. Except as required by state law, we do not maintain insurance to cover your personal property or personal injury. We are not responsible to any resident, guest, or occupant for damage or loss of personal property from (including but not limited to) fire, smoke, rain, flood, water and pipe leaks, hail, ice, snow, lightning, wind, explosions, earthquake, interruption of utilities, theft, hurricane, negligence of other residents, occupants, or invited/uninvited guests or vandalism unless due to owner’s omission, fault, negligence, or misconduct.
In addition, we urge all residents, and particularly those residing in coastal areas, areas near rivers, and areas prone to flooding, to obtain flood insurance. Renter’s insurance may not cover damage to your property due to flooding. A flood insurance resource which may be available includes the National Flood Insurance Program managed by the Federal Emergency Management Agency (FEMA).
*Note that this is for informational purposes only and should not be construed as legal advice. We recommend seeking guidance from a qualified legal professional to ensure that your lease language is compliant with local regulations and adequately protects your interests.
2. Send a Follow-Up Reminder
When: Shortly After Lease Signing
While including renters insurance in your lease is a great first step in enforcing the requirement, you’ll still want to follow up with incoming residents after the lease signing. That’s why many property management offices send out additional communications to remind tenants about the requirement and outline next steps.
This outreach may look slightly different for every property company. Depending on your community demographics, you may want to deliver your messaging via phone, email, text, or another widely adopted form of communication. You’ll also want to include a few pieces of information, including an introduction to renters insurance, the specifics of your building’s requirement, and how residents can complete the insurance verification process.
Here’s an example informational email from a large property company:
3. Conduct Insurance Verification
When: Before Move-In
To avoid any gaps in protecting your business, you need to confirm that your resident has active coverage before day one. In fact, for tenants moving without professional help, renters insurance may step in as early as move-in day for covered perils such as theft of belongings or injury to a guest.
Many landlords complete the insurance verification step by requesting a PDF or screenshot of the resident’s declaration page. This allows them to review the policy details and compare them against their requirements. However, due to the friction in this process, as well as the risk of fraud or cancellation, the industry is beginning to adopt more modern insurance verification methods.
With an automated verification solution like CheckMy Resident, you can pull your tenant’s insurance data directly from the carrier. You’ll receive an easy-to-read results report confirming whether their policy information is active, accurate, and adequate. Not only does this save time for leasing offices who would otherwise spend time reading through declaration pages, but it also eliminates the risk of verifying fraudulent or inactive policies.
4. Provide Insurance Options (If They Don’t Already Have a Policy)
When: Before Move-In
When building an effective renters insurance program, you’ll want to remove as much friction from the process as possible. By streamlining your workflow, you’ll help maximize tenant adoption and minimize overhead for your team. Part of this means creating a standard mechanism for getting uninsured tenants onboarded with an adequate policy.
CheckMy Resident offers embedded insurance to integrate this step seamlessly into your process. With this feature, if your resident says that they don’t have an active policy at the time of verification, or if their coverages don’t meet your minimums, they’ll be presented with some options to acquire a policy quickly and easily. Once they select and purchase a policy that meets their needs and your requirements, they can move forward with verification.
Not only does this streamline the insurance verification process for you and your tenants, but it can also present an opportunity to earn ancillary revenue. Similar to establishing a direct partnership with a renters insurance carrier, connecting your renters to embedded insurance allows you to generate income when they buy a policy. Get in touch with our team to learn more about how it works.
5. Set Up Automated Insurance Monitoring and Risk Mitigation
When: Throughout Lease
Conducting insurance verification before move-in is a critical first step to protecting your rental business. However, you’re not quite out of the woods after that. According to recent data, 45% of insurance policies are canceled before the end of the lease. That’s why it’s important to establish a process to check your residents’ coverage on an ongoing basis.
Fortunately, CheckMy Resident allows you to set up monthly insurance monitoring in order to ensure that your renter’s policy stays active and adequate. Then, if their insurance does lapse, CheckMy Resident will automatically prompt them to reinstate their coverage with embedded insurance options. This automated flow allows you to stay updated on your residents’ insurance, hands-free.
Start Automating Your Insurance Verification and Monitoring
Ready to launch your new and improved renters insurance verification process? Learn more about how CheckMy Resident can help you protect your business while improving your internal efficiency.
Read On: Download Our Free eBook
Inside The Seven Deadly Sins of Renters Insurance:
- The top mistakes property managers make when it comes to renters insurance
- Tips and strategies to avoid the leading pitfalls when building your renters insurance program
- A step-by-step guide to automating your insurance verification and monitoring process