Security deposits are the most common form of financial safety net for property managers, but are they the most effective? Termwise by Findigs offers renters a smart way out of the traditional deposit cycle, while keeping people, properties, and piggybanks protected.

What are security deposits for anyway?

Security deposits offer important financial protection for property managers. Imagine if your neighbors all stopped paying rent tomorrow: your property wouldn’t able to make up the losses, and your home would be in jeopardy. In order to keep the rental market stable, the risk of missed rent payments or unpaid damages must be offset somehow. Property managers do this by collecting extra cash from you upfront, and today, we typically just accept that burden.

If you’ve rented before, you know what it’s like to hand over one or two month’s rent at the start of your lease. In the best case, that sum gets returned back to you at move-out, hopefully in time for your next property manager to ask for the same thing. Maybe you lose all or part of it to cover damage. At worst, the gray area of who’s responsible leaves you fighting to get your money back.

Even if every cent is returned, money that isn’t actively working for you is slowly losing value. Renters are asked to give away cash that could be kept as a rainy day fund, or invested to grow. Rather than leaving you with that choice, billions of dollars are tied up in security deposits, unable to generate value. Managing these sums also takes extra work and operational overhead for property managers. No matter how deposits shake out, it’s tough to see why this system has been standard procedure for so long.

Savvy renters have deposit options

Fortunately, new solutions called security deposit alternatives (or “SDAs”) have emerged as a way to keep both parties protected without the burdensome deposit. Security deposit alternative is a broad term referring to any financial product that works in place of the traditional deposit transaction. Whether it’s a bond, installment plan, or insurance policy, SDAs can offer greater upfront affordability and financial flexibility to renters, while reducing risk for the property. One of these is Termwise: an insurance-based deposit alternative offered by Findigs.

Termwise: smart assurance for the long term  

With Termwise, residents can secure their lease terms with small monthly payments instead of a lump sum deposit. Termwise is an insurance policy, removing the need for property managers to rely on your cash alone as a safety net. Renters pay a low fee towards the policy premium (think $30 or $40 added onto monthly rent) and the hundreds, if not thousands, of dollars that would have been your deposit stick with you.

In addition to lowering the upfront cost of moving in, Termwise is also a more transparent form of protection. Renters are still responsible for damage, but don’t need to pre-pay for damage they may or may not cause. With this system, there’s no worrying that the property withholds funds they don’t actually need, since they aren’t holding onto your money in the first place.

What does coverage look like?

Let’s say you’re renting a $1,500/mo home. Typically, you’d be asked to hand over at least one month’s rent on top of your first rent payment: a total of $3,000 before you even step foot in the home. But you opted for a Termwise plan, so $25 is added to your total household rent instead.

Now imagine when it comes time to move out, you’re responsible for some damage outside of normal wear and tear. If a $100 window repair is needed, that’s what your household will be asked pay. You would owe the same amount whether you opted for Termwise or the traditional deposit, but in this case, there’s no worry that the property is going to hold onto your $1,400 unnecessarily, or invent another cost out of nowhere. You’ll simply reimburse the property manager for the exact cost of the damage, and move on.

The bottom line is simple: renters can save their cash and find peace of mind by opting for Termwise rather than a flat out deposit, and that’s without even factoring in the chance to invest your would-be deposit sum.

Is Termwise right for me?

Termwise can be a smart option for any renter who knows to look for it, but is particularly helpful for those interested in keeping more cash on hand. Here are a few basics to understand before starting your plan:

• Termwise is a paid product, not a deposit. That means this money won’t be returned at the end of your lease. A ballpark range for your fee amount might be anywhere from $20 to $50 per month depending on your monthly rent price. In general, higher rent will mean a higher fee.
• Your monthly fee is the premium for a plan that covers your home. The associated insurance coverage belongs to the property manager, and they’ll file claims only when they need to.
• Residents are responsible for property damage or missed payment. If you cause damage to the property beyond the reasonably expected wear and tear, you’ll need to reimburse your property manager for costs incurred.

Start your plan with Findigs

Property managers using Findigs can offer Termwise as part of their post-approval experience for residents. Eligible renters will find the option to choose between a Termwise plan and a traditional deposit as a step on the way to lease signing. (Eligibility is based on your location, and a set of criteria similar to the home’s approval requirements.) Once you’re a Findigs user, other helpful move-in services like these all become available in your dashboard.

Findigs is committed to making it simpler for renters to get approved and move confidently into their next homes. With a sensible alternative to the traditional deposit, we’re excited to remove barriers for people on the move, and help make renting work for all of us. Learn more at Findigs.com.