Too many agents and brokers are unaware of a rental policy term that may end up costing both the client and themselves, says veteran New York City agent Mark Carrasquillo.
“Loss of use” coverage is a built-in coverage that reimburses a client for the cost of living elsewhere if the apartment comes uninhabitable because of a covered loss, such as fire. However, while the coverage is vital, most renters and condominium insurance policies offer limits of just 20% of contents coverage.
“That is definitely not enough coverage,” said Carrasquillo, who works as an account executive at EG Bowman. “The intention of loss of use is to make you whole. What a person should do, and how they should be advised when they purchase coverage, is to say ‘How much would it cost you to survive for 12 months somewhere else while your apartment is being fixed?’ And it’s not only rent, but day-to-day needs like toiletries.”
Unfortunately, many agents overlook this critical step—particularly with young professionals who are looking to cut costs in any way. Because agents generally accommodate these requests by lowering contents coverage, they leave clients exposed.
For most individuals, Carrasquillo recommends an adjustment of loss of use to cover 40% to 50% of contents coverage in order to get adequate policy limits.
This was a lesson he didn’t learn himself until two of his clients—who happened to be his parents—suffered fire damage in their Bronx apartment.
“They only had $12,000 of loss of use coverage, and there was no way they could find a 3-bedroom apartment for $1,000,” Carrasquillo said. “This was the Bronx where you can maybe get a one-bedroom for $900.”
Fortunately, Carrasquillo’s family pitched in to take care of his parents while their apartment was taken care of. Others, however, may not be so lucky.
Thanks to that incident, Carrasquillo and EG Bowman now make it a policy to address loss of use coverage during every referral and new client consultation period.
“From that one incident, the practice in the office changed,” he said. “You just can’t leave it at 20%.”
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