How damage caps leave properties exposed to loss

Today, there are several deposit alternatives on the market that help properties lower move-in costs for residents while adding protection against damage and missed rent. But not all of these options function in quite the same way.

While some of the differences may seem minor, they can have a significant impact on the value to the property. Damage caps are a great example of this.

Keep reading to learn what damage caps are, what that means in the context of deposit alternatives, and how they can leave properties exposed to loss. 

What is a damage cap?

Before we get into the downside of damage caps, here’s a quick refresher on what they are:

Many insurance policies have “caps” on how much they’ll pay out for specific types of claims. For example, while the total amount of coverage included in a renters insurance policy might be $20,000, the plan might limit, or “cap,” the protection for jewelry of valuables to $1,000. 

In the context of a deposit replacement product, a “damage cap” limits the amount of a policy that a property can use to cover damage to a rental unit. So, for example, while a policy might offer $5,000 in coverage, the provider may only allow the property to use $500 worth of that coverage for repairs. 

How do damage caps leave properties exposed?

Damage caps can prevent properties from using the coverage their residents purchase to cover the expenses they incur. 

For example, let’s say a resident purchases a deposit alternative with $5,000 in coverage and a $500 damage cap. Then, at move out, the property discovers that the resident has caused damage that will cost $683 to repair. 

Even though their policy technically offers $5,000 in coverage, the property can only use $500 of that to cover the repairs—leaving them with a $183 loss. 

In a policy without damage caps, on the other hand, the property can use the entire coverage amount to pay for any necessary repairs. So, for example, if that same resident had purchased $3,000 in coverage with no caps, then caused damage that would cost $683 to repair, the property would have more than enough coverage to make those repairs.

This not only helps the property avoid loss, but also ensures that the resident isn’t paying for more coverage than they actually need. If a property can get the coverage they need from a $3,000 policy rather than a $5,000 policy, that could mean significant savings for the resident.

Do Jetty policies have damage caps?

Great question. Nope! 

When it comes to damage, we never limit the amount of a policy our partners can use to get the repairs they need.

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