What is security deposit insurance?
Security deposit insurance is an alternative option to a traditional security deposit required by a landlord as part of his rental terms and conditions. A traditional security deposit is typically paid in cash or cash equivalent at the tenant’s move-in and held by the landlord for the term of the lease. If the rental unit is returned to good condition at the end of the lease term, the security deposit is refunded to the departing tenant.
Most landlords require a security deposit equal in amount to one month’s rent. As rents in many areas have continued to rise, the equivalent required security deposit amount has also increased. For some potential tenants, the move-in costs can be a financial burden for the rental housing of their choice. The option of security deposit insurance could reduce the amount of up-front expense for a tenant at move-in.
Security deposit insurance is available from third party companies, as applicable by law and as offered by a rental housing provider. However, unlike the traditional security deposit accounting and return policy, the security deposit insurance premium is non-refundable.
Although treated as an insurance product, security deposit insurance should not be confused with renters insurance. Security deposit insurance is another way to guarantee a tenant’s performance under the lease agreement. If the tenant damages the rental property, a landlord makes a claim on the policy similar to the landlord making a claim for losses from a traditional security deposit.
There are other general terms and conditions that may apply. Terms of service and policy offerings may vary by company and by location. A landlord interested in this service would need to conduct his own research regarding availability and requirements.