Episode 26: Protect Your Properties - Why multifamily renters insurance is essential for property management companies
Having that preferred [property] insurance solution definitely reduces the stress on residents and [...] eliminates the gaps in coverage that property managers and owners might see.Head of Insurance Products at GetCovered
Vendors that do provide those preferred [multifamily] insurance solutions often also provide the compliance and tracking mechanisms that severely ease the burden on site teams, property managers, and leasing agents alike.Head of Insurance Products at GetCovered
We do automatically include in our policies additional coverages for [...] those types of items that wouldn't normally be included on a residence policy. We've built those into our packages to ensure that they're further protected when residents are responsible for those types of losses.Head of Insurance Products at GetCovered
How multifamily insurance protects properties, residents, and their most valuable assets
Why multifamily operators should provide residents with property insurance options [3:50]
- Renters insurance provided by property management companies are typically called preferred insurance solutions. Benefits to providing include:
- Ancillary income opportunities like marketing fees, administrators fees, or even commissions if the client is licensed.
- Big risk mitigation opportunity and ensures a higher percent of residents provide and maintain the required insurance.
- Reduces the stress on residents.
- The insurance vendors often provide compliance and tracking mechanisms that severely ease the burden on site teams, property managers and leasing agents.
- Potentially save hours a day for leasing agents by not having to explain requirements to residents, provide addendums that they create, collect, and record documents, etc.
- Don’t have to track and chase when an approved policy lapses or expires during the lease terms.
Worst case scenarios involving the lack of property insurance [9:45]
- A common scenario we hear is when a property management company assumes there’s coverage and a loss occurs. It’s only after trying to file through the carrier they find out the policy has expired or canceled and are hit with a hundred thousand dollar loss having to come out of pocket.
- Partner [of GetCovered] had a situation where residents were moving from unit to unit within an apartment building and during the course of moving furniture hit some exposed piping that ended up causing severe water damage to a number of units. Fortunately, they had our [GetCovered] master policy solution in place, but the total loss ended up being about a million dollars if not more. If they didn't have those solutions in place, they'd be taking the brunt to funnel that through the commercial [owner’s] coverage that's in place, and it would've been a much more expensive endeavor.
What’s covered in renters insurance policies? [12:50]
- The majority of renters insurance policies that a renter gets independently only cover the standard perils, e.g. fire, smoke, water explosion, overflowing sewer.
- Additional coverage to be aware of that can impact an average of 10-20% of claims include falling objects, collapse, freezing of pipes, pet damages, bed bug remediation, and those types of items.
- Unique endorsements can include intentional damage or vandalism.
Costs in managing multifamily insurance [14:45]
- Typically there is no upfront cost for the management company. It’s resident funded as the resident is purchasing the policy.
- Since the master policy is written for the managers and owners and residents can enroll into and pay the premium along with their monthly rent, some customers charge the resident an administrative fee on top of that premium cost. This is some ancillary income to help offset any operational expenses that they may incur for the management company.
Duplication of existing commercial insurance coverage [16:38]
- Commercial insurance is for the large losses as deductibles can be $25K to $100K and aren’t designed for lower level resident cases of losses that are under $100K.
- If you file a claim against the commercial property for these lower losses, with the high deductible, the chance of recovery is low. Plus, risk an increase in premiums. Properties can use the resident funded insurance coverage as the first layer of coverage.
- Oftentimes, commercial carriers are willing to give premium discounts when you do have an underlying (resident) insurance program in place or you have a compliance management program in place, because they know that the risks are further mitigated.
Federal and state regulation for renters insurance [19:30]
- Regulations will vary widely based on state for what you're able to require, what you're able to charge in addition to rent or within the rent, and what options you're able to provide to the residents so that you aren't at risk of getting notices from the departments of insurance or receiving a cease and desist notices from certain insurance departments.
Michael has 10 years of experience in the insurance industry, with seven years specifically in property management insurance and deposit alternatives. He is a specialist in product development, account management, and captive solutions. He continually strives to be proactive in finding creative solutions to meet clients' risk management needs.
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All right, well what's up Michael? Welcome to the show.
Thanks, Yolanda. How are you doing today?
Doing pretty well. Happy it's a Friday.
Well, let's kick off our conversation today and have you tell our listeners a little bit about yourself, your background in multifamily, and maybe an overview of Get Covered and what you offer.
For sure, for sure. Well first of all, very happy to be here, so I appreciate you all letting me hop on. So as you all know, my name's Michael Tinetti. I work with Get Covered as the head of the insurance product team. I went to the University of Georgia, go Dawgs, graduated in 2013 and immediately after school started in commercial insurance at Zurich Insurance in Atlanta, but did not get into multifamily or single-family insurance until 2016 when I joined a small company called LeaseTerm Solutions. And I've been in this space ever since, really lots of experience in renter's insurance, master policy solutions, deposit alternatives, captives, rent guarantee products, so on and so forth. Really anything relating to risk mitigation and risk management solutions for multifamily and single family providers.
And I actually joined Get Covered about a year and a half ago, and what Get Covered initially started as was strictly a technology company partnering with carriers, insurance agents, and then others to provide website management, compliance tracking, and kind of workflow processes. But what the founders and our current CEO discovered after doing that for a bit was the potential of offering insurance products as well. And so over the last few years we've really developed a full suite of solutions for the risk management space for property managers, owners, leasing software, and other distribution type partners to utilize, in addition to the technology that we are able to offer.
Excellent. So help me understand a little bit more, why would a property owner want to provide the renter's insurance options to their residents as opposed to having residents secure their own insurance and then submit proof? What's in it for property managers, why should they buy in here?
Yeah, absolutely, that's a great question. And there are obviously a number of different benefits for property managers in regard to why they would want to present or offer preferred insurance solutions. One of the major points being obviously there's ancillary income opportunities associated with these types of solutions. Owners and managers offering resident insurance programs are able to make some ancillary income, whether it's through marketing fees, administrators fees, or even commissions if the client chooses to become licensed. And many clients do view this as kind of the biggest objective when implementing these types of programs.
However I will say from my perspective, the biggest benefit of providing preferred insurance solutions, as I refer to them, is that there's a great risk mitigation opportunity available and it generally ensures a higher percent of residents actually provide and maintain the required insurance, due to the affordability, ease of use, the convenience of it all relating to those preferred insurance programs. And whether you're offering H04s or offering a master policy solution, providing residents an easy and seamless solution and way to satisfy those requirements without breaking the bank, leads to higher take rates and therefore less uninsured units.
And even when preferred insurance solutions are offered, residents still will have the opportunity and ability to seek and select their own coverage and provide proof of coverage. But generally speaking, most of these residents aren't going to be insurance experts, and when they do seek coverage on their own they have to spend time researching, working with insurance agents and this can be a bit overwhelming and lead to them not meeting the requirements or just delaying and delaying and therefore there's out of compliance units, or uncovered units as we call it.
So having that preferred insurance solution definitely reduces the stress on residents and can also provide them with the easy signup solution via a reputable program written through AM Best A-rated carriers, and that not only eliminates the gaps in coverage that property managers and owners might see, but vendors that do provide those preferred insurance solutions often also provide the compliance and tracking mechanisms that severely ease the burden on site teams, property managers and leasing agents alike.
As we all know, it's extremely cumbersome to chase residents down, whether it's for insurance or any other bills that they're responsible for or any of the requirements, it's often very cumbersome to chase those residents down and ensure they have all the necessary coverage in place. So insurance providers like Get Covered offer the full suite of solutions and services to clients in order to allow those management companies and owners to focus on the hundreds of other responsibilities that they do have.
Got it. Okay. So you just mentioned removing that administrative burden on the leasing and management teams. What kind of impact are we talking about here in terms of efficiency on the property manager side and then what on the GetCovered side really is making that possible?
Yeah, absolutely. I mean we're talking about potentially hours saved a day, and in my experience I would hear horror stories of leasing agents just spending so much time trying to manage and maintain the insurance side and make sure that everyone meets the requirements. So if you think about it, you require insurance with no preferred program in place, everything falls on you and your leasing team. You're having to explain those requirements to residents. You're having to provide addendums that you most likely had to take the time to create yourselves, make sure it's in line with insurance regulations and your state laws. You're trying to collect those insurance documents, you're trying to read through those pages of insurance legalese, trying to determine if those residents have the right coverages, and then if it's determined that they do have that right coverage, you have to then record and note that in your management software.
And then on the flip side, if a resident does not provide insurance or the coverage does not meet your requirements, you're spending time calling them, emailing them, chasing them down to get what you need in order for them to get their leases signed and get those keys to get into their units or homes.
And furthermore, you still run the risk of accepted policies or approved policies lapsing or expiring and the management companies in leasing teams most likely aren't going to have time or would be unaware of those adverse changes, which leads to out-of-pocket expenses through uncovered losses or just not knowing that a policy was no longer in effect.
So those are the burdens that we see on the site teams and the management companies generally. And so what Get Covered works to do is take on all of that responsibility, so everything runs through Get Covered. So we're not only providing an insurance package that residents can enroll into, but we're also taking care of the compliance and management related to those that have secured their own coverage. So again, that entails everything from reviewing those policies, letting them know if it's approved or rejected, making sure that the property management company has notice of those accepted or rejected policies, providing the correct information as far as the policy details associated with each resident.
And then also we will maintain and monitor the coverage as it goes through the residents lease to make sure that they aren't canceling those policies early, to make sure that those policies aren't expiring or non-renew without another solution in place. And this further guarantees that the clients that we work with do have that 100% coverage without making the lives of those leasing teams miserable. They aren't insurance experts, we don't expect them to be insurance experts, so we want to take over as much of that burden and responsibility as possible.
Got it. Now, I almost hate to ask this question, but I really want to, what's the worst case scenario you've seen play out in real life? I need horror stories or lessons learned that come to your mind?
Well, I mean there's a number of I would say horror stories or even kind of comical stories related to the claims that we do see, but really in my opinion, the worst case scenario is kind of what I just described, where you assume that you have coverage through a residence policy or you have coverage in some effect and then a loss occurs and then next thing you know you're going to file through the residence's carrier, whether that's State Farm, Allstate, GEICO, whoever it may be, and come to find out that policy expired or canceled or lapsed five months ago. Next thing you know you're getting hit with a hundred thousand dollar loss having to come out of pocket for those issues that just occurred when you had previously assumed that you were covered. So those types of situations are very common when you're trying to manage and maintain an insurance program on your own, which is why more and more companies are reaching out to third party providers to help facilitate and manage that process.
One specific example that we've seen here at Get Covered is a partner that we worked with actually had a number of different situations where residents were moving from unit to unit within an apartment building and during the course of moving their couch or some piece of furniture hit some exposed piping and ended up causing severe water damage to those buildings and damaged a variety of units. Now fortunately for them, they had our master policy solution in place, but the total loss of those situations ended up being about a million dollars if not more, and if they didn't have those solutions in place, they'd be sitting there taking the brunt of that on their own, having to funnel that through their own insurance, and by that I just mean the owner insurance, that commercial coverage that's in place, and it really just would've been a much more expensive endeavor.
So having that underlying layer of coverage via these types of programs that we offer is imperative and can help you avoid those horror stories that you referenced.
Right, definitely. And are there specific coverages in place with Get Covered policies that a resident or a property management company wouldn't be able to get through normal insurance markets?
Yeah, that's a great question as well. And while I can't give away any of our trade secrets obviously, we do spend a lot of time honing and creating the products that are best to fit the needs of both our clients, who are the management companies, landlords, owners, et cetera, and also the needs of the end users being the residents, and that applies to both our HH4 policies and our master policy solutions.
So on the master policy side of our products, we've really created and tried to develop a comprehensive policy that provides as much protection as possible for the management companies and landlords and whatnot. And what I mean by that is we've kind of expanded the perils that are covered to ensure against more of the resident cause damages outside of your standard perils. So you know what, if a resident goes out and gets policy from State Farm for instance, most likely that policy will just include coverage for your standard perils of fire, smoke, explosion water and overflow sewer.
Now while 80 to 90% of the claims we see result from those coverages, what we do automatically include in our policies is additional coverages for things like falling objects, collapse, freezing of pipes, pet damages, bedbug remediation, those types of items that wouldn't normally be included on a residence policy, but we've built those into our packages to ensure that they're further protected when residents are responsible for those types of losses.
In addition to that, we've also created some unique endorsements, intentional damage or vandalism being an endorsement that we've developed in the past few years here to again, provide further protection for the clients that we work with.
And then on the resident side of things, specifically rated related to our master policy solutions, we're just working to provide as expansive of coverages as we are able to on the surplus lines side of things. We are in a very litigious country these days unfortunately, so having defense against suits brought for bodily injury on premise, property damage that a resident might cause, those types of items, it's very important to make sure that you're covered there or at least be aware of the risks of being uncovered.
So those are the types of items and additional endorsements that we've developed over the past few years to help provide further protection and further comfort for the clients that we work with as well as the residents that are renting from our clients.
Makes sense. So we talked a little bit about why operators should provide insurance coverage for their residents and then the benefits and pitfalls that they might face if they don't. Now I'm curious if you could talk a little bit about how can property management companies offset the costs of managing insurance?
Yeah, absolutely. Well one of the great things about working with Get Covered and a lot of the providers of these types of solutions in this space is that there's really no upfront cost for the management company. Essentially these programs are resident funded in the sense that residents are choosing to enroll in certain insurance programs, and so it's all resident funded in that sense, and then the clients are getting protected via those policies that are in place.
Now under our master policy solutions, that's a little bit different than an HO4 renters' insurance policy in the sense that the master policy is written for the managers and owners, that policy is written in their name and residents can enroll into that and just pay along with their monthly rent. So what a lot of our clients end up doing is charging an administrative fee on top of that premium cost, so they are able to make a little bit of ancillary income to help offset any operational expenses that they may incur on their side of things when they are operating these programs or engaging in these programs. And so again, while it is resident funded, there is a bit of ancillary income available there as well.
And outside of that, everything kind of falls on the vendor or the third party provider who is managing and maintaining these programs for the management companies that we do work with. So they aren't having to come out of pocket for any expenses, the residents are either purchasing a renters insurance HO4 policy through get covered, or if they're enrolling into the master, again they're still paying along with their monthly rent and therefore the management company is not having to come out of pocket to provide this insurance for residents or to take out additional policies in their name and make sure that they're properly protected.
Okay. And just a quick follow up here, just related to costs for me, just out of curiosity here, don't companies already have insurance policies in place to cover their assets? Why would they need to have residents covered by another program? Would that be extra or duplicative coverage? What's the difference?
That's a fantastic question, and it is a question we do get a lot from prospects that we're speaking to. I have my commercial insurance in place, or my landlord coverage in place, or my owner has an umbrella policy that covers us. And that is true, they do have those policies in effect, and those are active policies, but those generally are for the really high end losses, limits up to a million or more, deductibles can be 25,000, 50,000, 100,000. So those are really reserved for the larger losses and losses that are related to the standard perils that I referenced earlier or things like weather. So they really aren't designed to cover those, what I'm going to refer to as lower level resident cause losses, those losses that are under a hundred thousand dollars.
Generally speaking, clients don't want to file claims against their commercial policy for those a hundred thousand or less losses because number one, their deductibles are already so high that chances are they're not going to recover that much of that. In addition to that, they could also risk increasing their premiums or risk being dropped altogether if they're filing too many claims against their commercial policy.
So what we promote is having this underlying layer of resident funded insurance coverage in place, again, whether the resident's furnishing coverage through an HO4 renter's insurance policy, or if they've enrolled into the management company's master policy, that provides that first layer of coverage there for the management companies and owners that we work with, so that they can funnel those a hundred thousand dollars and less losses onto these master policies or onto the H04 renter's insurance programs, and therefore they're getting paid up to that full hundred thousand, rather than having to go and file against their commercial carrier where they might only be netting the amount less their deductible or where they might be getting hit with additional premium costs.
Now outside of that specific benefit, oftentimes commercial carriers that are providing that owner policy or that landlord policy are willing to give premium discounts when you do have that underlying insurance program in place or you have that compliance management program in place, because they know that the risks are further mitigated, they know that the claims aren't always going to be coming to that commercial policy and they're willing to offer some discounts in certain scenarios.
So it's always very beneficial to reach out to your commercial provider, let them know that you have this underlying policy or program in place and see what they're willing to do and see if there's additional ways that you're able to save money and costs.
Awesome, thanks so much for clarifying that. One aspect of insurance we haven't yet touched on is actually regulations, local and federal. How, if at all, do you see the landscape changing here? Are expectations loosening, tightening, are they remaining the same?
I would say that they are tightening. There's obviously a lot of consumer rights issues being raised across the country and the States want to make sure that the residents understand what they are required to do, understand what their options are, understand what may or may not be permissible, all that type of stuff relates to the insurance regulations, whether you're in Georgia or if you're on the West Coast, unfortunately it does vary from state to state. And so what we do see is that some states are more loose with their regulations as far as what administrative fees you can require, what types of insurance you can require, whereas others are very kind of straight and narrow and are limited to, you can't charge any administrative fees or if it's affordable housing, you're not able to require insurance. There's certain Section 8 regulations that need to be adhered to as well.
And so you just want to make sure that whichever state, whatever type of market that you're in, you're aware of the different regulations and legislations that are in place as far as what you're able to require, what you're able to charge in addition to rent or within the rent, and what options you're able to provide to the residents that are renting through you so that you aren't at risk of getting any notices from the departments of insurance or of receiving any cease and desist notices from certain insurance departments.
Good point. So how does a company like Get Covered help properties navigate all these changes?
Yeah, absolutely. Well, the caveat I will definitely give here is that we are not attorneys, so we're not trying to provide any legal advice, but what we have is a very good relationship with our carrier who will always provide notices of any changes that they notice in the markets, whether that's on the master policy side of things or on the HO4 legislation as well. And they're always keeping us up to date with different state statutes as well, so if there's ever changes in New York for instance, or Texas or California, they're letting us know of those situations and then we're able to get in front of our clients and explain what may or may not have changed, we're able to explain what alternatives they may have, and then obviously we would always recommend that they speak to their internal counsel as well. But our goal here is to be as communicative and as transparent as possible when it comes to these types of changes.
For instance, if in New York you're no longer able to provide contents options within a master policy solution, we would let our clients know about that. We would explain that you can still offer a liability only solution that would protect the assets, but for any resident contents belongings, they have to go elsewhere or purchase an HO4 through a provider. So we would get in front of them and let them know of those changes, let them know how we can potentially tweak the program if they had something different in place that's no longer permissible.
But again, it all comes down to just being knowledgeable and aware of any changes that have occurred in the industry, and then obviously working with your internal counsel to get comfortable with any programs that you were getting ready to move forward with.
Makes sense. Are there any best practices you've seen when it comes to insurance management? For instance, is there a specific insurance type or a plan that the majority of property managers should consider?
Yeah, absolutely. And this kind of relates to what I had touched on at the outset of our conversation, and that options are always good. I know that some people are concerned that too many options leaves residents or any consumer to maybe choose something that's adverse to your needs, but at the end of the day, providing them with options and clear and concise information about what's available to them is very, very important.
So what Get Covered strives to do is, again, provide a full suite of solutions. So by that I mean that we are offering a master policy solution, which again is going to be a policy that's written for our clients and residents have the easy, affordable option to enroll into that. That's a convenient solution, a very quick and easy way for a resident to satisfy the insurance requirement. In addition to that, we do also provide true renters insurance policies via our HO4 program, where if residents want to customize their programs more specifically, increase their limits, add special endorsements, they can do that through us as well.
And then lastly, the third option would be secure insurance through a carrier of their choosing, or someone that they may have worked with previously. A lot of residents are moving in with their insurance policies already bundled to their auto insurance or they were military members or had military family and they've got a great relationship with USAA. Oftentimes those types of residents aren't going to want to go with the preferred insurance solution and just want to stick with what they're comfortable with, which is totally fine. And that's why you want to convey to anyone who's moving in or signing leases through you all or through any property management company, that here, we've got these preferred insurance solutions, but ultimately it's up to you to pick and choose what you want to do and do what you're comfortable with. And that helps to improve resident relations as well as also it helps to give the residents the necessary information to make an educated decision.
So the idea is that no matter what type of renter is moving in, there's an option that will satisfy their needs and they'll be comfortable moving forward whilst meeting those requirements.
Thanks. So I can't leave this conversation of course without asking our podcast namesake question about resident experience. And so I'm curious how you personally would define resident experience and how or where might you fit a solution like Get Covered into this concept?
Yeah, absolutely. Well from my perspective, the resident experience should be open, honest, and communicative as well as convenient for residents. It's extremely important for managers and owners to do their best to support residents during the leasing and living process. As we all know, moving is extremely stressful, if you're having to move across states or purchase new furniture, figure out how to get your security deposit paid and all that stuff, it really just adds up, it's very stressful. So alleviating as much of that stress from residents greatly improves relations.
So when it comes to insurance programs like what Get Covered offers, providing clear material and options, providing clear material on the requirements, the next steps, all that goes into what's needed for a resident to satisfy that lease requirement, is absolutely something that should be focused on by our clients and anyone in the multifamily and single family space.
And that's where Get Covered really can greatly provide benefit through our trainings, our customer support teams, the marketing materials we provide, and then obviously through direct interaction with residents as well. We don't want any clients of ours to get stuck in a back and forth trying to discuss the ins and outs of an insurance policy with a resident. So to help that resident experience, we obviously have people that are dedicated on our side to help discuss those coverage interpretations, to help residents make the best decision as possible. And these are licensed representatives to provide that expertise to those that might not be as familiar with the space.
In addition to that, we would never really recommend that these programs are used as a truly just a money-making operation. We want to make sure that the residents are also supported in getting the benefit that they deserve whilst meeting their requirements. So we want to support the residents from the time that they view the home or the apartment until the time that their lease ends. And so any program that we provide is thoroughly vetted to provide as much benefit to both residents and the PMs, or property managers, as possible. And again, we just want to make sure that it's an easy, affordable, and convenient way for residents to satisfy those insurance requirements.
Thanks for that. Last one for you, Michael. Super easy question, but I love to ask this because we know that great people know other great people. So do you have any recommendations for a future guest on our show?
Well, I mean, I don't know if you want to keep going back to the Get Covered well, but I think our CEO and my boss, Brandon Tobman, would be a great option. He'd probably be a bit more animated than I would and get some laughs in there, so I think it could be a pretty entertaining conversation. And he's got great experience in this space, even outside of insurance. He's been working in this space for a while as I referenced, and could really provide some good insight into what he's seeing in the market and probably give some entertaining stories and some experiences as well.
Great, thank you so much for that one. Michael, it was so nice chatting with you today. Thanks so much again for coming onto the show, I'm excited for our listeners to enjoy this episode.
Absolutely, happy to do it. And again, thank you so much for having me.