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Financial risk of uninsured tenants

Uninsured tenants leave landlords in a precarious position when unforeseen events occur.

Photo courtesy: APOLLO Insurance

As a landlord or property manager, the smooth operation and maintenance of your rental properties are paramount. However, amidst the everyday challenges, one often overlooked aspect is the financial risk posed by uninsured tenants.

Say an accidental fire engulfs a unit, or a burst pipe floods multiple floors — without tenant insurance, these incidents can quickly escalate into financial nightmares for both landlords and tenants alike.

Understanding the risks

Uninsured tenants leave landlords in a precarious position when unforeseen events occur. Whether it's damage to the rental unit itself, neighbouring units, or common areas, the financial burden typically falls on the property owner. Repair expenses can quickly spiral out of control, especially when coupled with hefty deductibles associated with commercial business policies.

Moreover, liability concerns loom large. If a visitor suffers an injury within a tenant's unit, they may hold the landlord accountable, leading to costly legal battles. In such cases, ensuring all your tenants have the proper insurance policies will mitigate your financial strain by covering legal expenses related to bodily injury, property damage, and even additional living expenses should their unit become uninhabitable due to a covered expense.

The cost of unpreparedness

The repercussions of being uninsured can be devastating for tenants as well. A recent study revealed that 51% of residents admitted they would struggle to replace their belongings without insurance. This highlights the vulnerability of tenants who fail to secure adequate coverage.

Here are some real life examples of how tenant insurance can save you and your renters in the case of an emergency:

  • After an apartment in Ottawa was flooded by a malfunctioning washing machine three floors above, they were paid out over $15,000. Personal belongings were exposed to standing water for several hours while the client was at work, and the restoration and repair for the apartment took over a month.
  • In Edmonton, an unattended pot of cooking oil in a neighbouring unit started a fire that evacuated the whole building. An APOLLO client whose sprinkler didn’t go off received a payment of over $14,000 for additional living expenses and contents.
  • After thieves entered a condominium complex in Vancouver, APOLLO paid out $8,600 to a client who had valuables stolen from a storage unit.

More statistics from tenant insurance claims

In delving deeper into the realm of tenant insurance claims, enlightening statistics emerge, shedding light on the prevalent risks faced by landlords and tenants alike:

  • Theft dominates: Strikingly, 4 out of 10 claims are attributed to theft. This underscores the importance of safeguarding personal belongings through comprehensive insurance coverage.
  • Fire damage magnitude: Fire claims stand out as particularly concerning, with their average cost being over 5 times higher than all other claims combined. On average, fire-related incidents incur expenses amounting to $36,000 — an alarming figure that underscores the devastating impact of such emergencies.
  • Water damage pervasiveness: While fire incidents garner significant attention, the data reveals that water damage poses a more prevalent risk, being four times more likely to occur than fire damage. Despite their frequency, water-related claims are no less significant, with an average cost of $6,000. This highlights the importance of proactive measures to mitigate water-related risks within rental properties.

These statistics underscore the imperative for both landlords and tenants to prioritize insurance coverage, ensuring protection against a myriad of potential risks and unforeseen circumstances.

Ensuring compliance and mitigating risk

In many parts of Canada, landlords are legally obligated to ensure continuous tenant insurance coverage — a requirement that not only safeguards tenants but also protects property investments. However, managing insurance compliance can be a cumbersome task, involving the collection and verification of insurance documents.

This is where APOLLO Insurance steps in to streamline the process. With APOLLO, landlords can automate insurance compliance, whether through providing comprehensive insurance, or allowing tenants to upload documents from third-party insurers. This helps REITs and property managers relieve the administrative burden associated with collecting proof of insurance — through integration with Property Management Software (PMS), APOLLO ensures that all incoming and current tenants are adequately insured.

How APOLLO can help

APOLLO Insurance offers a comprehensive solution to mitigate the financial risks posed by uninsured tenants. All new tenants can be adequately insured by embedding insurance into the leasing process, by providing the option to easily purchase from APOLLO or upload a policy. By automatically verifying insurance coverage and tracking policy expiration dates, APOLLO helps landlords maintain compliance effortlessly. In cases where tenants are uninsured at move-in or renewal, APOLLO offers a base policy, ensuring that adequate coverage is always in place.

Furthermore, APOLLO provides landlords with real-time notifications of policy cancellations, enabling proactive management of insurance compliance. By centralizing insurance information and documents within the landlord's PMS, APOLLO facilitates easy access to compliance reporting at various levels—from portfolio-wide assessments, to building level reporting, to individual tenant details.

APOLLO Insurance

Website: APOLLO Insurance

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