Tenant Default Insurance?
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There is a new insurance for us residential landlords out there called Tenant Default Insurance. You pay annually for this insurance and if your tenant doesn’t pay the rent you can collect the rent from the insurance company. This takes away the risk of someone living in your home and not paying rent. Pretty crazy!
The insurance will cover defaulted rent for up to six months. This should be enough time to evict the deadbeat tenant. If the tenant you want to cover has been in the home for over 12 months and hasn’t defaulted on the rent then they can be covered without a “tenant check”. If the tenant has been in the home for less than 12 months then they need a “tenant check” in order to be covered under the insurance.
A tenant check consists of a credit report, a check of prior evictions, and a criminal background check. All stuff you should be doing anyways on a new tenant. The home also as to be a “full time” rental. In other words, no vacation homes.
The insurance covers up to six months rent when the tenant just stops paying and needs to be evicted. They will also pay three months rent in situations like the tenant dies, or gets deployed for military service. Lastly, they will pay for up to $1,000 for legal services. The deductible is one month’s rent. Which means that the tenant needs to miss two months of rent before coverage kicks in.
The cost is also very reasonable. If the rent is under $1,200 the premium is $250 per year and then it goes up from there depending on the rent amount. I think that is pretty cheap for so much peace of mind.
Will I be getting this for my rental property? Probably not. This insurance is perfect for those who are being forced to rent their homes because they can’t sell yet are forced to move for some reason. Usually people in those cases aren’t getting enough rent to really cover their costs. They are breaking even on covering the mortgage, if they’re lucky. In those cases there just isn’t wiggle room if the rent goes unpaid. They could lose the home in short order. In that case, yes, $250-$300 per year is worth the protection.
In my case we do have wiggle room both in the rent and in our budget if we were forced to pay the mortgage ourselves. So we aren’t at risk of losing the house. Would it stink to have to pay two mortgages? Yes! But we could do it if we had to. So in our case we are self insured.
However, I think it’s very cool for those that need it.
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Ashley
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Comments
Awesome!!!..
This would be a great financial risk tool, I own 12 properties and have dealt with default in the past.
Please direct me to the vendor who supplies it..
Thanks
Timmy
Aon is the provider of this insurance coverage via our web site http://www.aonrentprotect.com. The underwriting company is QBE. Both Aon and QBE have offered tenant rent default coverage in the UK and Australia for over 20 years. The coverage is new in the US.
Please feel free to call us or email us with questions. While Aon and QBE may not be household names you are familiar with, both are large, well known, multinational companies who have partnered to bring this insurance to the US. We are happy to see your interest!
Lisa Meinert
Wow, this is really interesting. I have never even heard of this insurance. Which companies offer it? Even though I’m “self insured” it might make financial sense to take out a policy because the likelihood of collecting seems so high.