Landlords: For first time, rent default insurance available in Colorado

Colorado Association of Realtors teams with insurance industry to offer first-of-its-kind protection for Colorado landlords

DENVER — For the first time in the United States, rent default insurance is now available to help residential landlords protect themselves against financial loss related to tenant defaults.

Colorado is one of a just a handful of states where the product, Aon Rent Protect, is being offered, according to the Colorado Association REALTORS (CAR), which is endorsing the product in its initial U.S. launch.

The insurance offers coverage, including replacement of rent for up to six months due to tenant abandonment, eviction or nonpayment, and replacement of rent for three months due to the death of a tenant. The product also includes assistance with legal expenses, such as attorney fees incurred during an eviction process.

Landlords routinely face a number of financial risks when renting out a home, including property damage, liability, and rent default. Aon Rent Protect offers protection for residential landlords for as little as $250 a year on properties with rental rates up to $1,200. A sliding rate scale offers protection on properties renting up to $8,000 per month.

Like many states across the country, Colorado’s rental housing market has grown significantly in recent years, spurred by the economic crisis, job losses, foreclosures and troublesome financing for would-be homeowners.

“If our tenants don’t pay us then we’re going to struggle to make that payment,” said Aaron DiCaprio, one of the first Colorado landlords to purchase Aon Rent Protect for his property in Centennial. “As an attorney, I know that it’s a protracted process to evict a tenant and we really can’t afford to pay that additional mortgage for four to six months. In short, the low premium for Aon Rent Protect was a no-brainer as it gives us peace of mind and makes us sleep easier at night.”

In the aftermath of the nation’s housing-market collapse and recession, more than 500 midsize and large cities have seen a rise in the share of homes that are rented rather than owned, according to a USA TODAY analysis of Census data. On average, a 2-4 percent increase in rental properties has been seen in Colorado communities up and down the Front Range and Western Slope.

Nationwide, renters now top a record 37 million and industry experts expect another 4.4 million households to become renters by 2015, according to a 2011 Wall Street Journal article. (http://online.wsj.com/article/SB10001424052748704680604576110062827617504.html)

But these statistics aren’t all good news for landlords and property managers, as the troubled economy has taken its toll on renters in much the same way it did when those same people were steady renters or homeowners able to pay their mortgage.

“There are so many factors to consider as a landlord ­— whether you have one property or numerous properties,” said Mike Treadway, property manager and owner of Prism Realty, Inc. in Greenwood Village. “A rent insurance product like this gives my clients a chance to protect their investment and stream of income, minimizing the overall financial risk through an extremely affordable coverage. Tapping into the policy protection just one time on one property could deliver a return on the annual premium over several years.”

While homeowner’s insurance will cover a property owner against claims of physical property damage or personal injury, it does not help a homeowner in the event a renter abandons the property, or worse, stops paying rent and refuses to vacate.

“This is a game changer for anyone who owns or manages a residential rental property in the State of Colorado,” said Steve Morgan, general counsel of CAR. “Just like homeowners who can’t pay the mortgage and foreclose, tenants lose their jobs and stop paying the rent. The loss of tenant income or subsequent eviction proceedings can create serious financial problems for landlords.”

The Colorado Association of REALTORS has officially endorsed this product in an effort to encourage REALTORS, property managers and other industry professionals to inform their clients about the new insurance.

“One of our initiatives at CAR is to help safeguard the well-being of Colorado homeowners and promote market stability,” said Robert Golden, CEO of the Colorado Association of REALTORS. “We would like to see all Colorado Landlords protect themselves and their investments.”

For more information on the Aon Rent Protect product and services, visit http://www.aonrentprotect.com

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