The use of surety bonds in the rental market might be growing. Assurant Health Insurance said in a press release on Wednesday that it had purchased SureDeposit, a company that sells security deposit services to the apartment industry.
Property renters in most states have little opportunity to sign a lease without forking over traditionally expensive security deposits. Over the past few years, a number of states have added provisions that permit landlords to accept surety bonds in lieu of security deposits. A number of rental professionals have found the situation to be win-win for landlords and their tenants, especially given recent economic conditions.
The amount required for security deposits varies widely depending on the property’s value, where it resides and the landlord who oversees it. Oftentimes landlords require first and last month’s rent, which could require a new renter to front a couple thousand dollars before moving in.
Rather than provide a security deposit, a renter moving into a property that accepts surety bonds pays a one-time, nonrefundable bond premium to a surety provider that acts as a third-party guarantor. Renters surety bond premiums typically cost a tenant about 10 to 20 percent of the deposit. So if a $1,500 security deposit is needed, the tenant will pay $150 to $300 for the bond depending on financial credentials.
These bonds also benefit landlords by protecting them from potential financial loss due to a renter’s negligence. Renters bonds make it easier for landlords to collect penalties for property damage. If a landlord finds damage to the property when the lease ends, the surety provider is legally responsible for reimbursing the owner. The renter would then be responsible for reimbursing the surety provider.