If you’re found responsible for a person being injured or property being damaged in your home, the insurance company pays. If your belongings are stolen or destroyed, the insurance company pays (minus your deductible). Essentially: Would you prefer to receive the dollar value of what you own (the “cash value”), or the cost of replacing it (which tends to be higher, as goods depreciate over time)? If you opt for the “replacement cost,” you’ll pay a higher monthly premium. Insurance companies make this distinction between the kinds of compensation a policyholder receives after losses.
Many insurance companies will give you a discount on your renters insurance if you buy it along with another policy - such as auto insurance - which is known as “bundling.” For consumers who live in high-risk states, Klamm said, “the first piece of advice is to get it - renters insurance - and then to consider cash value versus replacement cost.” WHAT SHOULD I KNOW ABOUT ACQUIRING RENTERS INSURANCE? They also recommend landlords increase the uptake of rental insurance by making it a default expense for renters, which they would choose to opt out of, rather than opting into. They suggest states mandate grace periods for consumers who experience financial hardship and struggle to pay insurance premiums, to help renters keep coverage if they experience cash flow issues. The authors of the Financial Health Network report recommend structural policy changes. As renters typically have lower incomes, less wealth, and lower financial health than homeowners, the difficulties have a compounding effect. “Those living in high-loss states were more frequently financially vulnerable than residents of low-loss states.”įollowing a disaster, renters are not responsible for financing repairs to the building where they live, but still need to replace or repair belongings that are damaged or destroyed. “Losses from natural disasters are an equity issue,” the study’s authors write. The losses are incurred by flooding, hurricanes, landslides, and wildfires, among other unusual weather events, such as tornadoes. States with higher-than-average annual losses include California, Florida, Louisiana, Texas, and Washington, according to the Financial Health Network.
“Some consumers prefer not to purchase insurance, especially if they are unaware of their risks or perceive their risks to be manageable.”Īsked why they choose not to purchase renters insurance, more than one in three polled said the cost was “too expensive” and they felt they had “no need for it,” according to the Financial Health Network. “The cost of insurance products can act as a barrier,” the researchers found. Only about 40 percent of rental households purchase renters insurance, according to a 2022 report by the Joint Center for Housing Studies by Harvard University, compared with 88 percent of homeowners who purchase coverage, according to a 2023 study by the Insurance Information Institute.Ī new analysis from the nonprofit Financial Health Network has found that the uneven distribution of insurance coverage tends to leave low-income households lacking policies, especially in states that have experienced the greatest losses due to climate disaster. That number’s based on a policy for a hypothetical 30-year-old with $30,000 in personal property coverage, $100,000 in liability coverage and a $500 deductible, but coverage rates vary widely by state and policy choices. The average cost of a renters insurance policy in 2023 was $148 per year, or about $12 per month, according to the most recent analysis by NerdWallet. Even though she had trained to handle insurance claims, Klamm found the process of re-acquiring possessions, communicating with the insurance company, and rebuilding her life grueling - and that’s with a policy in place.
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