The renter's segment is made up of a wide variety of people: from freshly independent students to retired couples downsizing into the simplicity of rented condos. The current difficulties in acquiring home ownership has led to a boom in the rental market. But, even as home rental surges, insurance coverage in this market is lagging behind.
According to the Insurance Information Institute, only 40% of tenants have renters insurance. Compare that to the homeowner’s market where 95% of homes are insured. One reason for that disparity is that renters do not fully understand the need for insurance. They often have outdated assumptions and misconceptions that keep them from taking the necessary steps to protecting their belongings. Also in most instances, it's not mandated by their landlords.
No doubt agents can help renters better understand property insurance and thus be in a more appropriate position to handle emergencies. Here are a few important things your clients need to know.
Landlord’s Insurance Only Provides Structural Coverage
A common assumption among renters is that the landlord’s insurance provides coverage for the home. That is only partly true. The landlord’s insurance normally covers damage to the structure of the property but not to the contents within. If the tenant doesn't have renters insurance, they would be left with out of pocket expenses to cover for stolen and damaged possessions.
An example of this is a pipe burst; a common occurrence in properties during the winter months. If a pipe were to burst and cause damage to the home of someone renting, the landlord's insurance would likely only cover the damage to the walls and piping. It would not, however, cover the person's damaged furniture or expensive rugs. Repair or replacement of damaged personal property would be the tenant's responsibility – a responsibility which could cost upwards of $10,000.
That is just one example of why many people in rental accommodations need to purchase renters insurance.
Renters Insurance is One of the Most Affordable on the Market
Homeowners are usually compelled by their lender to take out home insurance. What’s more, they need to take on policies that cover both the structure and contents of their home. That, naturally, makes homeowners insurance premiums more expensive than someone in a rental property. The latter only need have content insurance.
How much an individual renter pays for insurance will, of course, vary. But the national average for annual premiums, at just $187. In a state like North Dakota, the average is as low as $115. For that, a renter can probably get around $20,000 in coverage.
Those figures certainly help dispel a common myth among renters: that renters insurance is expensive. You can even encourage your clients to bundle their policies to get extra discounts.
Liability Coverage is Usually Included
Another important benefit to taking renters insurance is liability coverage. Often packaged alongside the basic insurance, liability insurance offers protection if someone gets hurt on the property and a lawsuit arises as a result.
If a visitor is injured while in a renter’s home, liability coverage will take care of the cost of care and legal proceedings up to the policy’s limit. The policyholder will only be required to pay the insurance deductibles, which, depending on the policy, can be as low as $250
For most standard policies the limit is around $100,000, but for a small increase in premiums, renters can get up to $500,000 in liability coverage. This added layer of personal protection could also help clients if they accidentally damaged someone else’s property.
Emergency Expenses Are Covered
A key aspect of property insurance coverage is the provision for emergency expenses, which is bound to provide much-needed peace of mind to renters. People who become displaced due to things like a natural disaster, vandalism, fire, or water damage can benefit from the additional living expense coverage.
It is a way to help ease the financial burden that inevitably affects people at this time. Hotel bills, transportation, even restaurant bills can be taken care of during this period of turmoil.
Insurance is a Requirement for Some Landlords
If all the above doesn’t sway your prospect to purchasing insurance, you can point out that some landlords require it as part of the tenancy agreement. In fact, since 2004 an increasing number of landlords have been putting the onus on tenants to get insurance coverage. Renters could severely limit their options for accommodation if they don’t have insurance.
Rather than forgo the chance to land that perfect apartment, it is important for renters to consider their options for insurance. They should first ensure that they have a full understanding of their landlord’s insurance policy and what is covered. Then, you, the agent, can speak with them to help the client choose the best insurance policy.
Credit History Matters
Some renters shy away from insurance because of concerns that a less than perfect credit score will affect their ability to get insurance coverage or access to the best rates. For those with an extremely poor credit history, the concerns may be justified. Credit history is an important criterion in the underwriting process of most insurance companies.
For people living in California, Maryland, and Massachusetts, however, credit history will not be an issue. Insurance companies are not allowed, by law, to deny insurance coverage based on credit score. If you have clients that rent in areas where credit history is a factor, the good news is that they can work on ways to improve their credit and get access to better deals in the future.
As an insurance agent, you can make a tremendous difference to the lives of those in the renter's segment. Like homeowners, if a disaster were to strike and damage the renter’s home and personal property they could be faced with a huge financial burden.
While it is clear that many renters have a reluctance to take on adequate insurance coverage, agents need to pay attention to this market. You can start by ensuring that the most important aspects of renters insurance coverage get communicated to them.