There are more Americans renting homes or apartments today than there have been in decades—but the majority of them don’t have renters insurance. Here's why that's a problem.
According to a recent report from the U.S. Department of Commerce, homeownership in the United States fell to its lowest level—just under 64 percent--in 20 years at the end of 2014.
On the flip side, that means that there are more Americans renting homes or apartments today than there have been in a generation.
What's so surprising about that, you ask? Consider that a poll conducted for the Insurance Information Institute in 2014 found that just 37 percent of renters in the United States have renters insurance.
That leaves a whole lot of renters who would have to reach into their own pockets to replace their possessions if a fire, inclement weather, or some other disaster damaged or destroyed their apartment or home.
Or, as Vincent Plymell, the communications manager for the Colorado Department of Regulatory Agencies puts it, all of the above-mentioned folks are "one cooking mishap or fire or other accident away from not only losing [their] stuff, but suffering through some very high cost bills."
After all, Plymell adds, "if you, as a renter, are responsible for something, such as a grease fire, the landlord, or his or her insurance carrier, would subrogate or sue you for damages done"—which is just the sort of thing that renters insurance is intended to protect you from.
Considering all of the drama—financial and otherwise--that's likely to erupt if something disastrous happens to their apartments or homes (and all of the possessions contained within) while they're uninsured, why do so many people fail to purchase a renters policy?
One possibility, according to Plymell, is that some people "just don't know it's available."
Here are some of the other justifications he and Chris Hackett, director of personal lines policy for The Property Casualty Insurers Association of America, have heard from people in this same situation:
In other words, the people who express this sentiment assume their landlord's insurance will cover any belongings that are stolen from their apartments or rental homes, or any belongings that are damaged or destroyed due to fire, broken water pipes, inclement weather, vandalism, and the like.
Unfortunately for them, that isn't how landlord insurance works. Instead, the point of this type of insurance is to protect the structure—walls, floors, ceilings, and more--of the home you rent or the building that contains your apartment from the perils mentioned earlier. It's not there to protect your possessions from those same catastrophes or mishaps. If that's what you're looking for, you're going to have to buy your own renter's insurance policy.
A lot of people seem to be "under the impression that renters insurance is expensive," Hackett says when asked why so many pass on it.
His take on the situation is reflected in the results of a recent Rent.com survey. This survey found that approximately 60 percent of people who don't have renters insurance thought it would cost too much.
"In reality, coverage is very affordable," Hackett shares. "A 12-month policy is typically in the $100 to $150 range." That’s only about $10 per month!
Exactly how much you'll pay for it will depend on the amount of coverage you want, whether you shell out for a "replacement cost" policy or an "actual cash value" one (the former will reimburse you for the amount it would cost to replace damaged, destroyed, or stolen items with the exact same items, while the latter reimburses you for what those items were worth at the time they were stolen, destroyed, or damaged—which means depreciation is factored into the calculation), and even where your rental house or apartment is located and how big or small it is.
Although a lot of people overlook renters insurance because they believe they can't afford it, many others do so because they think the amount they could afford wouldn't adequately protect them in the event that some of their belongings were stolen or if they were damaged or destroyed due to fire, lightning, or a whole host of similar disasters.
As was previously pointed out in our own article, "Renters Insurance Basics," though, most renters policies—even the ones that'll cost you $150 or less a year--provide $15,000 to $30,000 in coverage. And if that's not enough, you'll likely be able to boost that amount for an additional cost.
"Many younger renters may be just starting out in life and may feel they don’t have many possessions worth insuring," Hackett says.
The fact is, though, that a lot of renters—both young and old--underestimate the value of their belongings.
On a related note, it's likely a good number of people ignore renters insurance because they believe nothing bad is going to happen to their apartment, house, or possessions.
To those folks, Hackett says, "fires and break-ins do happen. Ask yourself: if you lost everything in your apartment [or house] tomorrow, could you afford to replace it all?"
If you think renters insurance is going to be a waste of money due to a presumption that you're never going to put it to use, remember that the same thing could be said of those car, homeowners, and life insurance policies for which you regularly send in payments.
So, just as you're OK with paying for car insurance year after year after year despite the fact that you've yet to file a claim, you should be similarly OK with paying considerably less for a renters policy—unless, of course, you're OK with replacing all of your clothes and jewelry and electronics on your own dime should something unfortunate happen to your apartment or house.
Something else that renters should, but rarely do, consider while contemplating buying this kind of insurance: the liability coverage it provides.
What this means is that if someone is injured by you or even by one of your pets while in your apartment or house the liability portion of your renters policy may cover some or all of the related medical bills.
Also, should that person decide to sue you because of the injuries they sustained while on your property, your renters insurance can help cover the related legal costs.
Add to that the fact that these policies often reimburse renters for living expenses should their homes or apartments be considered temporarily uninhabitable, and it's clear that renters insurance is a great value.
If you'd like to learn more about what renters insurance is, how you can get it, how you can save money on it, and more, read the other articles we've written about renters insurance.
A: In general, renters policies protect your possessions (clothing, electronics, furniture, jewelry, etc.) from fire, smoke, windstorms, vandalism, theft, and a few other instances. (Check the fine print, or ask your agent, to find out which specific catastrophes are included in any policy you're thinking of buying.) They also usually offer liability coverage, which protects you in the event that someone is injured while in your rental house or apartment. Finally, a typical renters insurance policy will pay for living expenses if you're temporarily forced out of your home due to one or more of the perils named earlier.
A: Yes, keep your renters policy active until you actually buy a home and obtain homeowners insurance. Once all of that is finalized, though, you'll want to drop your renters insurance, as it duplicates some of the coverage that will be provided by your homeowners policy.
A: It's great that you already have renters insurance. It is likely to be a great help if your home is broken into. If you haven't done so already, you should consider creating an inventory of your possessions. (Some advice related to doing this can be found in our article, "Create an Inventory of Your Possessions for Homeowners Insurance Claims.") That will come in handy if you have to replace any items that are stolen, damaged, or destroyed, as it will help speed up the recovery process.
Your best course of action in a situation like that would be to file a claim with the carrier that sold you your renters policy. They'll take things from there, although you probably can assume the process will proceed along one of two paths: if your neighbor is found negligent (which basically means he caused the fire in some way), your insurance company will try to collect damages from his insurance company. If your neighbor isn't declared negligent, your insurance company will pay for your losses and his will pay for his.
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