Advice on Insurance Company Paying Tenant Rent

Member since 2019 · 7 posts · 2 votes

I just had an insurance company approach me about their client wanting to rent my house. The tenant's insurance provider would pay the rent, but tenants would be on the lease. Haven't yet gotten the application, but suspect the tenants couldn't afford the rent without insurance paying for it. The insurance company will pay above market as it's less than a year lease (9 months). On paper, it's a good deal but am worried about having tenants on lease without insurance company listed there and they won't be a guarantor. Anyone have experience with this? I would appreciate advice. Thanks!

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Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

7mo

Quote from @Sharon Freedman:

These are usally great deals!

Insurance companies have to provide housing for their clients who've experienced a claim that doesn't allow them to occupy their home during repairs.

Insurance company guarantees the rent.

They used to offer minimum 6 month leases and pay 25-50% more than 12-month lease rates.

Last few years most only want 3-month lease terms.

Good news is most of these leases end up getting extended by the insurance company!

Only real concern for a landlord is how well the tenants will take care of the property.

[email protected]248-209-6824

Logical Property Management4.9460 Reviews

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Michael K GallagherBusiness Member
Real Estate Agent · Columbus OH · Member since 2018 · 1k+ posts · 1k+ votes
7mo
Do you have any insights into why they need the rental via the insurance? is their house being worked on and they want to move back? the situation could reduce some of the risk in my mind. If the tenants are solid and their incomes are good I don't think there's much risk in having the insurance pay the lease even if the insurance isn't on it. I'd simply have language that clearly explains the tenants are on the hook and if payment is missed you'll be treating it like any other eviction proceeding. would also have a real estate attorney review it in general to understand your risk around having them stay past 9 months and how to address that.
[email protected]614-362-2231
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- Sharon Freedman
  OP
  Member since 2019 · 7 posts · 2 votes
  7mo
  Quote from @Michael K Gallagher:
  
  Do you have any insights into why they need the rental via the insurance? is their house being worked on and they want to move back? the situation could reduce some of the risk in my mind. If the tenants are solid and their incomes are good I don't think there's much risk in having the insurance pay the lease even if the insurance isn't on it. I'd simply have language that clearly explains the tenants are on the hook and if payment is missed you'll be treating it like any other eviction proceeding. would also have a real estate attorney review it in general to understand your risk around having them stay past 9 months and how to address that.
  
  Thanks Micheal. Their house was destroyed in a fire. I think an attorney is definitely needed in this case.
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Drew SygitBusiness Member
Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
7mo
Quote from @Sharon Freedman:

I just had an insurance company approach me about their client wanting to rent my house. The tenant's insurance provider would pay the rent, but tenants would be on the lease. Haven't yet gotten the application, but suspect the tenants couldn't afford the rent without insurance paying for it. The insurance company will pay above market as it's less than a year lease (9 months). On paper, it's a good deal but am worried about having tenants on lease without insurance company listed there and they won't be a guarantor. Anyone have experience with this? I would appreciate advice. Thanks!

These are usally great deals!
Insurance companies have to provide housing for their clients who've experienced a claim that doesn't allow them to occupy their home during repairs.
Insurance company guarantees the rent.
They used to offer minimum 6 month leases and pay 25-50% more than 12-month lease rates.
Last few years most only want 3-month lease terms.
Good news is most of these leases end up getting extended by the insurance company!
Only real concern for a landlord is how well the tenants will take care of the property.
[email protected]248-209-6824
Logical Property Management4.9460 Reviews
Website View Page
1 Reply
Kenneth GarrettPro Member
Investor · Florida Panhandle/Illinois · Member since 2016 · 4k+ posts · 3k+ votes
7mo
@Sharon Freedman
This is a typical mid term rental. Generally they are furnished, but they don’t have to be. Insurance companies pay higher than market rent. Homeowners are displaced due to their house being damaged by fire, storms or other reasons. Insurance policies have a loss of use coverage where the building is not habitable.
This can be very lucrative for you. Even better when your house is furnished. Check out the mid term rental forum for conversations on this topic.
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Sharon Freedman
OP
Member since 2019 · 7 posts · 2 votes
7mo
Thanks Kenneth. I will check it out.
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Mia G.
Property Manager · Aurora, IL · Member since 2018 · 45 posts · 34 votes
7mo
@Sharon Freedman Definitely sounds like a great deal. I would first make sure it's a reputable insurance company. You can run the equivalent of a personal credit report, but for the company itself. It's called a Dun & Bradstreet report. I've only ever done it through my company software screening service, but I think you can buy it directly from dnb.com. It's $140 and I would just charge that to the insurance company as the application fee. If the insurance company is paying you directly, they shouldn't be opposed to this.
As for the tenants, run a background check on anyone over 18. I never let anyone rent from me unless I have a clean background check on file.
On the other hand, if it's some kind of deal where the tenants pay and the insurance reimburses them, then I would do full credit and background screening, as well as income verification for the tenants. If the insurance company isn't legally liable on the lease, then the tenants have to qualify on their own.
As someone else mentioned, consult with an attorney either way. Better to be safe than sorry.
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Sharon Freedman
OP
Member since 2019 · 7 posts · 2 votes
7mo
Very helpful. Thank you!
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Janice Carter
Real Estate Broker · Atlanta · Member since 2024 · 1k+ posts · 606 votes
7mo
I have been contacted by ALE Solutions a few times with similar proposals, although none of those materialize. That said, I heard that they are legit and do pay.

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