Pub. 5 2020 Issue 5

4 www.ctaahq.org Mandating Renters Insurance By Susan Morgan, The newsLINK Group O ne of the most important business decisions you will make in the property management business is the rent you charge. It consists of two parts: determining whether people can afford the rent and also whether they think it is a fair trade for what you are giving them. Some property management companies are reluctant to mandate renters insur- ance for just that reason. They don’t want to increase the total cost of leasing. Setting the total cost too high, after all, can lower demand if people then decide to buy a place to live instead of renting it. If too many people choose to buy instead of rent, pricing strength weakens right along with occupancy and revenue. Do the facts support this argument? Consider the following: • During the last 10 years, renting an apartment has definitely become a lifestyle choice, one that has been made by the 19 million people in the U.S. who currently live in one. Experts expect the market to grow by an additional 4 million new rental households during the next 10 years. • ORC International conducted an Insurance Information Institution poll. According to the poll, 95% of homeowners have homeowners insurance, but only 40% of renters have renters insurance. An increased number of renters results in increased revenue for the property management business, but it also means increased risk. Why is it that home- owners are opting for insurance to mitigate that risk and renters are not? Common fallacies include: • A belief that property insurance policies cover household contents. Property insurance actually covers only the buildings and infrastruc- ture, not a person’s possessions. • Thinking that personal belong- ings are not worth much and are therefore not worth insuring. USAA estimates that the average renter owns possessions worth $20,000. Allstate puts the aver- age higher, at $30,000. • The belief that rental insurance is too expensive. It is certainly true that health insurance and car insurance are both expensive, but renters insurance is surprisingly affordable. According to a state-by- state comparison performed by Insure.com, the median annual cost of car insurance is slightly more than $1,300. That puts monthly premiums at slightly more than $108 per month. Renters insurance, on the other hand, is approximately $12 a month or $144 a year, as- suming someone buys a policy for $30,000 of property coverage and $100,000 of liability coverage. RealPage, Inc., a company that was founded in 1998 and that provides property management software solu- tions for markets within the rental housing industries, decided to research