What is a surety bond? An effective alternative to security deposits

Insurance can be confusing. Yeah, we admit it. New and sometimes complex security deposit alternatives can make it difficult to understand who pays what and how coverage actually works. Landlords may think a security deposit alternative sounds riskier than the traditional cash deposit. 

This is why Rhino has built a simple insurance product that uses the surety bond model to effectively protect property owners from unit damage and unpaid rent, the same way a security deposit does. Our security deposit insurance is flexible and customizable to suit your needs, and it gives renters a more affordable option at move-in. Licensed in all 50 states, and abiding by each state’s regulations, Rhino is backed by trusted insurance partners. Plus, insurance through a surety bond is easy to understand and explain to residents when you invite them to enroll with Rhino.

What is a surety bond? 

A surety bond is a contract between three parties:

1. The principal (renter) 

2. The surety (Rhino) 

3. The obligee (property owners)

The surety (that’s us) protects the obligee (property owners) who enter into a contract with the principal (renters).  A surety bond contract (security deposit insurance) defines a certain set of obligations for renters: The renter must pay rent on time, and the renter can’t cause more damage than what would be considered normal wear and tear. 

If the obligations in the surety bond aren’t met, the obligee can file a claim with the surety. The surety will pay the obligee’s claim and then in turn hold the principal responsible by billing them for the cost of the claim. 

In summary, a surety bond is used to protect the obligee from any damages caused by the principal, with the surety acting as a mediary between them. 

Traditional and dated surety bond products have limitations for property owners and renters alike. These limitations include: 

• Pre-set and inflexible coverage amounts, limiting protection and claims that landlords can make.

• Pooled coverage from multiple contracts that results in extremely high prices for renters (up to a 17.5% flat rate upfront) regardless of their credit. 

• Inflexible claims process that holds renters accountable for claims that may not be their fault. 

Now that you have the surety bond basics down, we can review how Rhino has updated this model to increase protection for owners and provide more contractual benefits for renters. 

Rhino offers renter-friendly security deposit insurance 

As the only renter-friendly security deposit insurance company, Rhino is guided by our principles to increase consumer protection and advocate for renters. 

Because of this, Rhino’s security deposit insurance distinctly differs from traditional surety bonds. We’ve updated this model and specifically tailored our insurance to the way residential leasing exists today. We made changes to ensure complete protection for property owners and improve affordability for renters who enter into this contract with you.

1. Rhino Flexible Coverage

Rhino Flexible Coverage differs from a traditional surety bond product, for the benefit of property owners and their renters.

Although property owners can’t require a cash security deposit from the renter alongside a Rhino policy, property owners can select the level of coverage they need to make the move-in process affordable for residents, while maintaining protection for their properties. Some property owners match the coverage provided by the cash deposit, while others opt to increase the amount of coverage past the amount of the cash deposit requirement in order to properly protect their units.

2. Cost-effective protection

With our model, the renter will purchase the policy from Rhino, and pay a cost-effective premium for the policy, either upfront or in monthly installments*. The Rhino policy premium almost always costs significantly less than an upfront cash security deposit for the renter. However, the money they pay Rhino is not refundable.  

How do we determine the quote that the renter? Once you’ve approved the renter to rent at your property, Rhino does a credit check to determine a quote for their Rhino policy  and the level of risk they pose to your property. The higher the risk, the more they’ll pay for their policy. However, most Rhino policies only average in $7-$13 per month, and can cost as low as $2-$3, for the renter. This is much less than traditional surety bond products and much less than a cash security deposit! 

3. A fair and quick claims process

Like other insurance products, Rhino enables the property owner to file claims for unpaid rent or damages done to the unit. They don’t have to wait for the renter to move out to file a claim, which is a benefit for the property owner that Rhino offers over the traditional security deposit. Rhino pays out the claim (in an average of four days!) and then in turn bills the renter for the claim.  

If a renter owes Rhino, they have options: We offer installment plans and in some cases, cover the whole amount owed. Renters are allowed to dispute the claim. We never report renters to credit bureaus or put their names on black lists that could impact their renting experience elsewhere. Property owners who care about their residents will clearly explain these benefits to prospective renters.

At Rhino, we believe we can protect landlords and renters and improve their relationship with each other through transformative renting products. Rhino’s surety bond model works as it accounts for the nuances of modern-day renting. This insurance product was made to provide the advanced protection owners need in 2021, at less expense to renters. 

To learn more about our renter-friendly security deposit insurance and elevate your  property offerings, contact us today.

*Pricing will vary by individual renter. Actual rates determined based on the specific information provided to Rhino. Monthly payment plans may not be available to all renters.

KT Heins-Nagamoto

KT Heins-Nagamoto is a senior brand writer at Rhino. They advocate for security deposit alternatives and renter rights in everything they write.