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I first though this was a great idea and offered it to a couple people who had sent inquiries. One agreed and I started to re-work the text in my rental agreement when I realized this could potentially create a huge problem. Part of my agreement says, "Your security deposit if fully refundable provided the following provisions are met:
1. The cottage is left clean and in the same condition as when you arrived. If not, an additional cleaning fee may be charged.
2. No damage is done, beyond normal wear and tear. Furniture is not stained or torn. No towels or linens are lost or damaged.
3. All garbage is placed in refuse containers outside and soiled dishes are cleaned. Used towels should be placed on the bathroom floor or in the bathtub.
4. All keys are left on the kitchen counter and cottage is left locked. A $20 fee will be charged for lost or missing keys.
5. There is no theft or damage to the cottage or property due to negligence of the guest to properly lock and secure windows and doors or turn off appliances.
6. Any charges accrued during the stay are paid prior to departure.
It was at this point that I realized that if I went with the damage insurance, the renter would have no incentive to do any of those things. I think having the security deposit really motivates renters to leave your home in the best condition possible because they want to be sure they get all of their money back. Aside from filing a claim for some real damage, the insurance doesn't do that.
I ended up lying to the guest and telling them that I just found out this option was not available in my state and I offered them a slight discount on my initial deposit quote. They still rented and I feel much better about it.
So, long story, short, that's my reasoning behind not choosing the insurance option.
Fortunately, we have only had two instances where we had to charge an extra cleaning fee (the tenants were absolute pigs) and another where one had an unapproved pet in the unit (which we would have allowed but she was trying to avoid the extra $50 cleaning fee). Both of these tentant talked me down on the rental rate and I have since learned that that is a HUGE red flag and won't rent to anyone who tries to negotiate the price. It's just not worth it.
I had the not thought about the cleaning aspect and the use of insurance. I agree with you on it negative effect. After a careful study of the policy saw the many loopholes such as not covering intentional damage. So here I think we have another marketing tool product that does not provide a real benefit to the owner. I don't rent to college students but for those owners that do it may provide some extra coverage on top of a large security deposit. I would charge the college kids for this as well.
In regards to your comment about the worse guests being those that bargain with you, you could not be more correct. A mild attempt at bargaining I don't mind. I refuse to budge and dismiss it as being frugal. With the more insistent guest, I tell them the unit is not available anymore. They are almost always trouble.
Thanks for your reply
Lorraine and Diver, EXCELLENT feedback. You are so right about the guests that want deep discounts, and in our case early check-in, late-check out are the one that are trouble. Also, we never, ever, ever rent for less than 2 nights. Yes..... I'd rather it go empty.
Jnowlen, I agree to a E or L checkin/checkout only one week before the tenant goes down and only if there are no guests to follow. It never works with back to back rentals. I say no to guests who ask about this so as not to get their hopes up. I will call and offer to guests if the circumstances (schedule) favors it. This way it is a bonus for the guest and an unexpexted suprise.
I totally agree with nothing less than 3 days and only in the off season.
Some have questioned the incentive guests have to protect our property if they pay for the damage insurance policy. Guests should be informed that if a claim is made, it could impact their other insurance. The insurance industry tracks all our claims -- home (owner or rental), auto, health, etc. - and the damages claim would impact the scoring system used to price insurance rates. (Similar to credit scores in the financial world).
That said, the points Lorraine made regarding the guest leaving the property in clean condition is important. We can't make a claim for these types of policy violations.
What is compelling to me about the damage insurance is that coverage exceeds the deposit we currently take. What if they break or take the new 60" flat screen tv? I'd have to chase after the tenant to collect the balance of the loss.
I think this all shows the importance of effective screening. Here we go!
I think there is a learning curve when you first change over to using the damage insurance vs security deposit. I don't charge a cleaning fee, nor do I charge if the house is not left clean. I have a cleaning crew that goes in after the guests have left, and clean and prepare the house for the next guests. I don't think it is up to the renters to be sure the house is left clean for the next renters. They are on vacation.
BUT- I do (or did) deduct from security if there were beach badges or keys missing. Not realizing that I have no security to deduct from until I had already sent out the leases, with the change over to damage insurance, I will have to hope for the best for this year. Any new leases I take from now on I have included a beach badge-key deposit.
I like the idea that the amount of insurance coverage far exceeds the amount of security we take. I had an instance where someone burned a hole in a lampshade and rug-I replaced the lampshade but the rug was a different story. $350 just didn't cover it. Luckily I had just ordered new furniture for that room and the new bed covered the burn. I think I was just so happy that they didn't burn the house down. Over the years, I have only had to keep partial security a few times, and only once did I have to keep the whole deposit.
I also think guests are more likely to report damage when they know they will not be loosing there security deposit, but we all have to do what we feel most comfortable with.
I wonder if there is a policy (or is the one on VRBO) available for the owner to pay for. Money's money isn't it? Why should the company providing the policy care where it comes from? I'd be happy to buy one for each renter and not even tell them that I've done so. This would solve the disincentive for the renter to keep the place clean and undamaged. I would also still charge the refundable security deposit and be able to refund it if any damage did not exceed the amount of the policy coverage. Looks like a win-win situation to me.
I've searched and searched, and I can't find information on the damage insurance policy that owners can offer renters in lieu of a damage deposit. Can somebody point me to it?
I see you just joined the community today and have left 6 posts about buying "deposit guard' on 6 different forums. Any chance you work for them since your comments sound like a tv commercial?
I have inquired with the company regarding all aspects of the insurance, who pays, etc. You can not take security and also have the policy. It is one or the other.
I'm afraid that's not what I was looking for. I don't want the renters involved or know about the insurance. This is apparently not possible. We have found that at least in the OBX, that renters who have this insurance are less likely to take good care of the property than they do if they have a security deposit on the table. If I could purchase the insurance myself, then I would not need to ask for a security deposit.
As it turns out I finally found the information right after I made that first post. I called the company, and they said that the renter is notified of the insurance even if I pay for it. They said there is no way around that.