Deposit Insurance = Genius?

[Kristine Ann]

One of my kids signed a lease with a big apartment complex.  She had a choice of putting down a deposit equal to two month's rent or paying monthly "deposit insurance."  The insurance is $150/month and she just renewed her lease.  

It worked for her because she was starting out and trying to conserve her cash.  And, wow, it works for the rental company!

The rental company doesn't need to pay the security deposit back to the tenant because it's "insurance."  The longer the tenant stays, the more insurance can be collected to add to the reserves . A landlord can keep those reserves and use it for normal wear and tear or more serious damages.  And let's face it, normal wear and tear is expensive between tenants.  It's pure genius.  

Who has offered this?  I'm wondering if I can do this?  Is there any restrictions on calling it "insurance" if the landlord is just going to deposit it into their reserves?

[JD Martin]

Quote from @Kristine Ann:

One of my kids signed a lease with a big apartment complex.  She had a choice of putting down a deposit equal to two month's rent or paying monthly "deposit insurance."  The insurance is $150/month and she just renewed her lease.  

It worked for her because she was starting out and trying to conserve her cash.  And, wow, it works for the rental company!

The rental company doesn't need to pay the security deposit back to the tenant because it's "insurance."  The longer the tenant stays, the more insurance can be collected to add to the reserves . A landlord can keep those reserves and use it for normal wear and tear or more serious damages.  And let's face it, normal wear and tear is expensive between tenants.  It's pure genius.  

Who has offered this?  I'm wondering if I can do this?  Is there any restrictions on calling it "insurance" if the landlord is just going to deposit it into their reserves?

 If you are offering it as a landlord, it's just semantics - you're charging higher rent and the incentive is that you waive the deposit. It's not a terrible strategy except you tend to end up with broke, desperate tenants because those with reasonable funds would prefer cheaper rent and a returnable deposit. 

There are several private companies that offer this service as a go between the landlord and tenant. I wouldn't do it as a landlord but it could be a strategy in areas where tenants have difficulty coming up with rent and deposit.