security deposit insurance

Companies Selling Security Deposit Insurance Face Skepticism

One expert says the term "insurance" is misleading, as companies sometimes go after tenants for the price of damage claims paid to landlords.

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Scraping together money for a security deposit on an apartment is a real struggle for many renters. But now, some companies say they can help you.

They’re selling what they call security deposit insurance, and if you buy it, you don’t have to pay that big cash deposit. But some say the product is misleading. 

Amanda Webster moved to LA right before the pandemic hit, when it was tough to snag an apartment. She finally found the “perfect place,” but it came with a steep security deposit: $10,000.

“I think a security deposit at this level was very prohibitive,” said Webster. 

So Webster’s landlord introduced her to Rhino, a company that sells security deposit insurance. Here’s how it works: instead of forking over $10,000 for the security deposit, Webster pays Rhino a non-refundable $34 monthly premium. This insures the landlord for the amount of the deposit. If there are damages when Webster moves out, her landlord files a claim with Rhino. 

“By being able to pay that small amount each month, as opposed to that larger deposit, I was able to take the apartment and get what I needed and kind of preserve my safety net,” said Webster.

Rhino’s CEO, Paraag Sarva, calls the insurance product a win-win: it makes housing more affordable for tenants, and it makes attracting tenants easier for landlords. 

Sarva says nearly one million renters buy the insurance. The premiums vary; they’re based on factors like the amount of the policy and your credit score. Sarva says the average monthly premium in LA is $11.

“Being able to offer an opportunity to move in without paying a deposit is a pretty big incentive for people,” said Sarva.

Even Mayor Garcetti was on board. Late last year he announced plans to require landlords to give renters a choice to buy security deposit insurance instead of paying a cash deposit. 

But not so fast, says Eric Dunn with the National Housing Law Project.

“It’s deceptive,” said Dunn. “They're marketing the product as something that it’s not.”

Dunn believes Rhino is misleading renters, because when Rhino pays the landlord for any damages, it in turn goes after the tenant to collect that money. So that monthly premium you pay is for, essentially, nothing. Dunn says while Rhino markets its product as insurance - it’s not. 

“The word ‘insurance’ communicates to people that you’re buying coverage,” said Dunn. “You’re paying a monthly premium for the peace of mind that if you cause some kind of damage that you’d be responsible for, this is going to cover it. And that’s not what happens.”

But Rhino says it is insurance, and marketing it as something else would be misleading and inaccurate. Rhino says it’s committed to transparency, and discloses on its contract and at the bottom of its website that the tenant must reimburse the company for any claims it pays. 

But Mayor Garcetti’s office is questioning the product, too. After the I-Team went to city hall with questions, a spokesperson said it won’t require landlords to offer the insurance after all. 

The I-Team also reached out to the Department of Insurance, which regulates Rhino. It says it’s looking into the product a little further, to confirm it’s complying with state consumer protection laws. 

Renter advocates, like Dunn, just want tenants to fully understand what they’re getting. Webster says she does, and forgoing that huge deposit was worth it.  “Everybody’s already paying so much for rent, that I feel like having that nest egg under your control makes a huge difference,” she said.

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