I'm renting an apartment from a landlord who requires me to get apartment insurance through a specific company. The leasing agent told me the landlord is paid a fee by the insurance company on every policy issued to renters like me. It sounds like a kickback. Is it legal for a landlord to get a cut of services they require renters to buy?
Landlords can ask renters to get insurance, but they can't require that it come from a specific company, our experts say.
Many landlords in NYC do require some proof of insurance coverage as a condition of an apartment lease. And even if they don't, it's in your best interests to take out a renter's insurance policy, as your landlord's policy will not cover damage to your personal property that isn't a result of the landlord's negligence.
Moreover, it's not against the law for your landlord to collect a fee from an insurance broker, but they can't dictate which company you use. And kickbacks, even when technically legal, are usually not in a tenant's best interest.
"The fee is probably allowed, but the requirement to use one insurer or agency is probably not," says Jeffrey Schneider of Gotham Brokerage (a Brick sponsor.) He cites a New York State insurance law which states that the payment of a fee by an insurer to a person making a referral is permitted—as long as it doesn't include discussion of a specific insurance policy.
But the fact your landlord is requiring you take out a policy from a certain company should raise a red flag.
"As an experienced agent specializing in rentals for over 25 years, I have never come across a landlord who dictated a specific insurance company be used," says Dennis R. Hughes, a broker at Corcoran. "You are the insured and it should be up to you to choose your preferred insurance company. I would be leery of the landlord."
If you decide you want to rent from this landlord anyway, you should research your renter's insurance options on your own. It's a very wise idea to have a policy, but it doesn't have to be the one your landlord prefers.
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