landlord/tenant insurance question

[Starmom2021]

What is the name of your state? Iowa

Can someone tell me what a "Force-placed Master Policy" is?

From the little information I could find online, it seems to be a landlord's liability insurance. If this is the case, and doesn't benefit/cover tenants in any way, why is a landlord requiring tenants to pay monthly premiums on it?

 

[LdiJ]

What is the name of your state? Iowa

Can someone tell me what a "Force-placed Master Policy" is?

From the little information I could find online, it seems to be a landlord's liability insurance. If this is the case, and doesn't benefit/cover tenants in any way, why is a landlord requiring tenants to pay monthly premiums on it?

Ok, generally what that means is that when someone is supposed to have insurance coverage on something, but either doesn't have coverage or doesn't have adequate coverage, an interested party can get coverage to cover their interests that the original person is not protecting and pass that cost on to the original person. That type of insurance is usually quite a bit more expensive than the original person getting proper coverage, and no, it normally doesn't provide any coverage to the original person, only the interested party.

The most cost effective way to avoid that cost, is to get proper insurance coverage.

For example, if the renter is supposed to have renter's insurance that also covers the landlord in case of negligence on the part of the renter, and the renter chooses not to get that kind of coverage because they don't want to pay for it, then the landlord can get a forced-place policy. Generally if the renter does not want to pay the higher price of a forced-place policy they would go and get the proper renter's insurance coverage.

This type of insurance is used more often in situations where there is a mortgage on a home, or a loan on a car, and the owner doesn't have insurance or has inadequate insurance. The lender can then go and get coverage to protect their interest in the home or car and make the owner pay for the coverage. However, it is sometimes used for rental scenarios as well.

If that answer doesn't seem to fit what is going on in your situation, then you need to be more specific about what is actually going on in your situation.

 

[quincy]

What is the name of your state? Iowa

Can someone tell me what a "Force-placed Master Policy" is?

From the little information I could find online, it seems to be a landlord's liability insurance. If this is the case, and doesn't benefit/cover tenants in any way, why is a landlord requiring tenants to pay monthly premiums on it?

A force-placed master policy is insurance purchased by the lender to cover their investment in a property when the homeowner has insufficient insurance coverage, or when the homeowner’s previous policy was canceled or the insurance lapsed. It does not cover the homeowner’s or a tenant’s personal property.

If the policy payments are not made, the lender can foreclose on the property.

 

[zddoodah]

Can someone tell me what a "Force-placed Master Policy" is?

In the landlord-tenant context:

Landlords often require tenants to have renters insurance and to have the landlord named as either an additional insured or an "interested party." This relates to the liability component of renters insurance. If the tenant gets sued for something (commonly, an injury occurring on the insured premises), then the insurance will indemnify the insured up to the policy limit and will also pay for an attorney to defend the insured in a lawsuit. Since landlords sometimes get dragged into such claims/lawsuits, the landlord wants to have the tenant ensure that the tenant's policy will also cover the landlord. In the event a tenant fails to obtain the required coverage, the landlord can obtain alternate coverage at the tenant's expense. Landlords can purchase master policies that will cover all units that do not otherwise have proper coverage. Note that the landlord will also have a separate liability policy to cover his/her/its own liability.

why is a landlord requiring tenants to pay monthly premiums on it?

Who cares?

Seriously. If your lease requires you to provide coverage, get it. Renters insurance is dirt cheap, and it costs nothing extra to add the landlord as an additional insured.

 

[quincy]

This does not sound like renters insurance (although some landlords may require their tenants carry renters insurance). Renters insurance typically covers a tenant’s property and damage caused by a tenant to a landlord’s property.

What Starmom2021 describes sounds more like the mortgage lender has required increased insurance coverage to ensure the property is adequately insured - which it often isn’t in Iowa due to Iowa insurance companies cutting back on what they will cover or how much they will cover. It sounds like the landlord/property owner is passing on these increased insurance costs to the tenants.

Here is a pretty good look at what homeowners are facing in Iowa when trying to insure their homes to meet their lenders’ requirements, published by the Des Moines Register earlier this year:

https://www.desmoinesregister.com/story/news/local/2024/05/31/iowa-insurers-cut-roof-coverage-customers-get-stuck-with-the-bill/73779335007/

As severe storms and other natural disasters across the country become more frequent, and as damages to structures become greater, insurance companies are struggling financially to satisfy all of the claims that are submitted. The insurance premiums are increased significantly or some insurers are even packing their bags and moving out of some communities and even some states (e.g., Florida due to flooding damage claims, California due to wildfire damage claims, Iowa due to tornado damage claims).

 

[LdiJ]

This does not sound like renters insurance (although some landlords may require their tenants carry renters insurance). Renters insurance typically covers a tenant’s property and damage caused by a tenant to a landlord’s property.

What Starmom2021 describes sounds more like the mortgage lender has required increased insurance coverage to ensure the property is adequately insured - which it often isn’t in Iowa due to Iowa insurance companies cutting back on what they will cover or how much they will cover. It sounds like the landlord/property owner is passing on these increased insurance costs to the tenants.

Here is a pretty good look at what homeowners are facing in Iowa when trying to insure their homes to meet their lenders’ requirements, published by the Des Moines Register earlier this year:

https://www.desmoinesregister.com/story/news/local/2024/05/31/iowa-insurers-cut-roof-coverage-customers-get-stuck-with-the-bill/73779335007/

As severe storms and other natural disasters across the country become more frequent, and as damages to structures become greater, insurance companies are struggling financially to satisfy all of the claims that are submitted. The insurance premiums are increased significantly or some insurers are even packing their bags and moving out of some communities and even some states (e.g., Florida due to flooding damage claims, California due to wildfire damage claims, Iowa due to tornado damage claims).

While I supposed it could be something that the landlord's mortgage company is requiring that really doesn't make a whole lot of sense in this context. Insurance is something that is normally built into the price of the rent itself and that would certainly be less controversial than a landlord surcharging for it. After all, that would not be something caused by the tenant, but rather by either the landlord for not having adequate insurance or circumstances preventing the ability to have adequate insurance.

Generally that type of insurance is due to the failure of the obligor to have the proper insurance in place. For a landlord to be the failed obligor and then pass it on as a separate fee to the tenant seems counterintuitive.

 

[quincy]

While I supposed it could be something that the landlord's mortgage company is requiring that really doesn't make a whole lot of sense in this context. Insurance is something that is normally built into the price of the rent itself and that would certainly be less controversial than a landlord surcharging for it. After all, that would not be something caused by the tenant, but rather by either the landlord for not having adequate insurance or circumstances preventing the ability to have adequate insurance.

Generally that type of insurance is due to the failure of the obligor to have the proper insurance in place. For a landlord to be the failed obligor and then pass it on as a separate fee to the tenant seems counterintuitive.

It appears to me like the landlord is being forced by his lender to have insurance enough to cover replacement costs, which many homeowners in Iowa can no longer afford to do.

 

[LdiJ]

It appears to me like the landlord is being forced by his lender to have insurance enough to cover replacement costs, which many homeowners in Iowa can no longer afford to do.

Yes, that is feasible, however again, it makes no sense to pass it on to the tenant as a separate fee. It would make sense to build it into the rent, but not to charge it as a separate fee. Charging it as a separate fee just raises questions/arguments. If it happens while a lease is in effect the landlord cannot charge for it if it is not due to a lease violation on the part of the tenant. If there is no lease in effect yet because it is a new tenant then charge rent accordingly. If the lender needs to raise the rent at lease renewal time then do so. There is simply no logic or benefit in passing it on as a separate fee if it is not due to a lease violation on the part of the tenant.

 

[quincy]

The reason for charging the tenants could be as simple as the landlord not being able to pay for the insurance on his own, and not wanting to risk foreclosure.

Perhaps Starmom2021 will return with more information.

 

[Starmom2021]

Thank you all for your replies.. is much appreciated.

 

[Starmom2021]

While I supposed it could be something that the landlord's mortgage company is requiring that really doesn't make a whole lot of sense in this context. Insurance is something that is normally built into the price of the rent itself and that would certainly be less controversial than a landlord surcharging for it. After all, that would not be something caused by the tenant, but rather by either the landlord for not having adequate insurance or circumstances preventing the ability to have adequate insurance.

Generally that type of insurance is due to the failure of the obligor to have the proper insurance in place. For a landlord to be the failed obligor and then pass it on as a separate fee to the tenant seems counterintuitive.

From the little info I could find online, this seems to be accurate.
And, while it's not included in rent- it's separate- tenants were told when landlords' insurance premiums increased, the increase is passed on to us (in other words, whenever this occurs, tenants must pay more).

I've never experienced anything like this in previous rentals, and it seems quite unusual.

 

[quincy]

From the little info I could find online, this seems to be accurate.
And, while it's not included in rent- it's separate- tenants were told when landlords' insurance premiums increased, the increase is passed on to us (in other words, whenever this occurs, tenants must pay more).

I've never experienced anything like this in previous rentals, and it seems quite unusual.

Does your lease speak to additional fees being assessed, over and above your contracted-for rent?

 

[LdiJ]

From the little info I could find online, this seems to be accurate.
And, while it's not included in rent- it's separate- tenants were told when landlords' insurance premiums increased, the increase is passed on to us (in other words, whenever this occurs, tenants must pay more).

I've never experienced anything like this in previous rentals, and it seems quite unusual.

It certainly is unusual. In fact, I would even call it a bit wierd. However, if the lease does not specifically spell out that it is a separate fee, over and above rent, and can increase whenever the landlord's cost increases then he/she cannot charge separately for it nor increase it.

It truly doesn't make sense to me. The landlord is unnecessarily creating controversy when he/she could simply build the cost of the insurance into the rent and be done with it.

 

[quincy]

… The landlord is unnecessarily creating controversy when he/she could simply build the cost of the insurance into the rent and be done with it.

The landlord cannot change the amount of rent during the lease period. Adding an additional fee can be a way to cover the increased costs incurred by the landlord, however. Utilities will raise rates and these increased costs are passed onto the consumer, for example.