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How to Insure Your Rental Income Against Tenant Default

The Latchel Team
May 30, 2019
How to Insure Your Rental Income Against Tenant Default

Like many, Aaron and Georgeann became accidental landlords.  They bought a property planning to settle their roots when circumstances took them elsewhere.

Soon Aaron and Georgeann were relocating across the country from Denver.  Back then that market wasn’t very favorable so they decided to rent their house.

At the time, Georgeann was 8 months pregnant with their firstborn, Aaron was starting a new job and they had recently closed on a new house.  Stressful times to say the least.

They hired a property manager and eventually entered into a lease with a qualified tenant…or so they thought. Five months later when their tenant’s rent didn’t hit their bank account they had the nagging suspicion that something was amiss.

Sure enough, they soon received a call from their property manager informing them that their tenant lost his job, his girlfriend left him, he was no longer loving the Rocky Mountain weather and was moving someplace warmer.  It sounded like the lyrics to a sad country song!

Needless to say, they weren’t getting paid.  And how would they ever find a new tenant in the middle of winter?

This unfortunate situation along with others inspired Aaron to launch Rent Rescue.  Owning an investment property – even if by accident – is a great way to plan for your future.  It shouldn’t be a headache.

Eliminate the Headaches With Rent Default Insurance

The US is becoming a nation of renters and rental property ownership, with its short-term returns through monthly rental income and capital appreciation on the asset is becoming a core investment strategy for both middle class investors and Wall Street trusts.

While the upside to investing in rental property is readily apparent, many would-be landlords are reluctant to get their feet wet.  Thin operating margins make the on-time collection of monthly tenant payments crucial.  And Landlords are limited to collecting a small security deposit to guard against tenant non-pay.

Lease defaults result in many landlords unexpectedly incurring court costs, attorney fees and unscheduled vacancy all while their investment property is no longer producing income.  In a number of states, tenant-friendly legislation can make it difficult for landlords to remove and replace the defaulted tenant, and court backlogs can prolong the process of procuring a court date.

So, what’s a landlord to do????  Buy Rent Default Insurance to protect their investment!

Rent Default Insurance has been widely available abroad in the UK and Australia for a number of years.  In those geographies, landlords don’t have to solely rely upon collecting a security deposit to mitigate their losses.  Instead, it’s quite common for a landlord to purchase Rent Default Insurance soon after closing on their investment property.

Like many products or services, it’s taken this type of insurance some time to make its way across the pond to the US…it’s finally here.

Depending on the situation, Rent Rescue’s rent default insurance policy will reimburse a landlord between 3 – 6 months of lost rental income when a tenant defaults on their lease.   Skips, non-pays and evictions are covered.

The policy has an additional benefit of covering up to $1,000 of the landlord’s reasonable legal expenses – a relief considering all of the other costs associated with removing the tenant and then getting the unit suitable for the next resident.

Rent Rescue’s coverage is really affordable with an annual premium around $300 per unit (not including taxes and fees).  The total cost can be tax deductible too; just make sure to check with your CPA or tax attorney.

Many landlords elect to pass the cost of the insurance on to their tenants in their monthly rent which usually equates to a 2% – 2.5% increase – fairly nominal.

How Can a Landlord Apply for Rent Rescue?

A landlord can apply for Rent Default Insurance on Rent Rescue’s website: https://www.rentrescue.com/.  Once there, a landlord answers a few questions about their investment property’s location, monthly rent and their tenant selection criteria.

To qualify, a landlord’s tenant must meet the following requirements:

  • A credit score of 600+

  • No evictions during the last 5 years

  • No bankruptcies during the last 5 years

  • They can financially satisfy the terms of the lease

  • Their rent hasn’t been in arrears for 30+ consecutive days during the last 12 months

A landlord can purchase the insurance with a credit card after the above information has been provided and the qualifications are met.  The whole process – applying and paying for the coverage – takes only a few minutes.

Submitting a Claim and Getting Paid is Quick and Easy.

The Rent Rescue team are investors just like you.  They’ve felt the pain of not getting paid and the last thing they want is for the claim process to be another nightmare.

Getting started is relatively simple.  A landlord can submit their claim on Rent Rescue’s website: https://www.rentrescue.com/make-a-claim/.

Then, all they need to do is key in some pertinent information and upload documentation such as the lease, notices to the tenant, relevant receipts and anything else that would expedite the processing and payment of their claim.  An adjuster will reach out to the landlord within 24 hours should they have any questions.

There’s a deductible equal to one month’s rent that needs to be satisfied before the insurance company will begin reimbursing a landlord’s lost rent.  Once that’s satisfied and the claim verified, payment will be made to the landlord within 30 days.

It’s that simple!  What’s your PEACE OF MIND worth?  APPLY TODAY!

Aaron DiCaprio is a landlord, attorney and CEO of Rent Rescue, a division of Next Wave Insurance Services with offices in San Diego and Rancho Cordova, CA (CA License: 0F00755); Philadelphia, PA; and Toronto, CAN.  Aaron can be reached at aaron@rentrescue.com.

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