Many renters seem to think insurance is just for homeowners, as more than half of Americans who rent a house or apartment lack insurance to protect them if catastrophe strikes, according to an insuranceQuotes.com survey.
The survey found that six of 10 U.S. adults who rent a house or apartment don’t have renter’s insurance. Many of these consumers fail to get coverage because they don’t realize they need it. For example, almost half (48 percent) of tenants incorrectly think a landlord’s insurance will cover them.
For Manhattan resident Alicia Cohen, it was a simple oversight that caused her to get caught without coverage during a disaster. When Hurricane Irene hit in 2011, she thought her ex-husband still was paying the premium on the policy for her penthouse apartment. The storm caused major damage to her apartment because of a leak that her landlord failed to properly repair, she says. She lost about $15,000 worth of possessions, including art, a shearling coat and hand-loomed wool rugs. And she’s now fighting her landlord in court.
Why not buy renter’s insurance?
Why do so many consumers go without renter’s insurance? The phone survey of 1,004 U.S. adults found that the problem of widespread lack of coverage is caused, in part, by myths and misconceptions about renter’s insurance.
Here are some of the key reasons renters gave for not getting insurance, according to the survey:
• My apartment or rental home has good security. This was the most common reason for a lack of coverage, cited by 57 percent of those surveyed. Experts say this isn’t a good reason to skip insurance. Why? Renter’s insurance protects against much more than just theft – think fire, accidents and disasters – and good security is not a guarantee. “You never know when something is going to happen,” says Sonja Larkin-Thorne, a consumer representative for the National Association of Insurance Commissioners.
• Renter’s insurance is too expensive. About 52 percent of renters cited cost as a big reason for failing to buy insurance.But renters often don’t realize how affordable renter’s insurance actually is, says Michael Barry, a spokesman for the Insurance Information Institute. In the survey, 60 percent of respondents guessed that renter’s insurance costs $250 a year, while 21 percent estimated it costs $1,000 or more. In reality, the average policy costs $185 a year, according to the National Association of Insurance Commissioners.
• The landlord has insurance. About 48 percent of tenants said they don’t need insurance because their landlord has it. But while a landlord’s policy covers the structure – walls, carpets and cabinets, for example – it does not cover your possessions. Also, it does not offer you liability coverage in case someone gets hurt in your home, or reimburse you for temporary lodging if your place gets damaged in, for example, a fire, experts say. Another thing to think about, Larkin-Thorne says, is that if you cause damage to the structure – for example, you grill burgers on your deck and cause a fire – your landlord’s insurance company could come after you. But if you have renter’s insurance, the liability component would cover you.
• I don’t own enough property to insure. In the survey, 38 percent of renters cited this reason for skipping insurance. But Larkin-Thorne says that, again, renter’s insurance covers more than just possessions – and many people underestimate the value of what they own. Even the most basic household contents – dishes, bedding, clothing, computers – can cost thousands of dollars to replace, she says.
Shopping for renter’s insurance
After you decide to get coverage that fits your needs, the smartest thing you can do is shop for a good price, experts say. In the survey, many of the 34 percent of renters with insurance failed to shop around. In fact, 39 percent of those consumers said they got just one quote before buying a policy. And only 28 percent of that group got the three or more quotes that experts typically recommend.
“The best thing to do is to shop and compare,” says Larkin-Thorne, who recommends talking to agents and looking online to compare coverage and costs.
Here are some other tips from experts on how to shop for renter’s insurance:
1. Don’t put it off. About 20 percent of people surveyed said they hadn’t had time to apply, but experts say it’s pretty easy to buy a policy and can save lots of time – and headaches – in the future.
2. Check with your car insurance company. Many car insurance companies also offer renter’s insurance, and consumers usually can get a discount by bundling the two policies, Barry says. Calling your car insurer also can be a good place to start if you, like 22 percent of the uninsured renters in the survey, haven’t bought coverage because you don’t know where to get it.
3. Examine coverage details. As with any insurance, it’s important to know exactly what the policy covers, at what dollar limits, as well as what it excludes, Larkin-Thorne says. Look at the coverage for your possessions, the liability coverage (in case someone sues you after, for example, being injured in your apartment) and the coverage for additional living expenses (ALE). ALE pays for a place for you to stay if your apartment or home can’t be occupied after a covered event, such as a fire or tornado. However, according to the Insurance Information Institute, it’s important to know your policy limits: some companies provide coverage for a certain amount of time while others offer coverage up to a set amount.
4. Consider replacement value coverage. Two types of coverage are available for possessions: replacement value and actual cash value (ACV), Barry says. If you get an ACV policy and the designer sofa you bought for $5,000 several years ago is destroyed in a fire, you might be surprised to get a check for only $3,500. A replacement value policy likely will cost a little more, but you’ll know that you’ll get enough money to buy a new item like the one you lost, Barry says, so the extra cost might be worth it.
5. Look at buying extra coverage. Just like homeowners, renters need to look at the coverage limits in their policy and either increase the total dollar amount of coverage, or get more coverage for specific items if necessary. For example, according to the Insurance Information Institute, it’s common for renter’s policies to carry limits on the dollar amount of coverage for expensive jewelry, sports or music equipment, furs and collectibles. For instance, Erie Insurance limits coverage to $3,000 for items such as expensive jewelry, guns and silverware that are lost as a result of theft. If you want to get extra coverage, called a “floater,” for a prized possession like an engagement ring, an antique or an art collection, you might need to provide the agent or company with an appraisal as well as receipts and photos, Larkin-Thorne says.
Princeton Survey Research Associates International obtained telephone interviews with a nationally representative sample of 1,004 adults living in the continental U.S. Telephone interviews were conducted by landline (500) and cellphone (504, including 254 without a landline phone). Interviews were done in English by Princeton Data Source from Feb. 7-10, 2013. Statistical results are weighted to correct known demographic discrepancies. The margin of sampling error for the complete set of weighted data is plus or minus 3.5 percentage points.