Who Needs Renters Insurance? All Renters Do*

*Including off-campus college students. Stay tuned for the second installment in our blog series on renters insurance, “When Your College Student Might Need Renters Insurance” next week.

For those who think they can’t afford it, you might be surprised to learn that the average cost of renters insurance in Ohio is about $179 a year, which is less than $15 a month!For-Rent-Sign-CREF

So, for about the cost of a few gallons of gas or a satellite radio subscription, an Ohio renter can protect their belongings for a month. Even though this is considerably less than homeowners insurance, it’s one of the most overlooked policies in the marketplace.

2013 Insurance Information Institute poll conducted by ORC International found that although 96 percent of homeowners carry insurance, only 35 percent of renters do.

Why Renters Insurance Is Overlooked

A 2010 survey conducted by Apartments.com found that the top reason for not obtaining renters insurance was cost, followed closely by those claiming they didn’t know such insurance existed.

There are other reasons too:   

  • Some renters mistakenly presume their belongings are covered under their landlord’s policy in case of fire or theft. Fact is, you’re not.
  • Renters, especially in apartment complexes or high rises, may feel their belongings are secure. In reality, rental properties are more likely to be victimized by burglary than owned homes, reports the US Bureau of Justice Statistics.
  • Renters often think what they own isn’t worth much. Believe it or not, most renters have at least $20,000-worth of property. Not many of us could afford to replace $20,000 worth of stuff if lost in a fire.

What’s Covered Under Renters Insurance?

Renters insurance covers against losses such as theft, vandalism, fire or lightning, windstorm or hail, smoke, water-related damage from home utilities, electrical surge damage and more.

Most policies provide additional living expenses (ALE) coverage if your home or apartment becomes uninhabitable due to a covered peril. This helps cover expenses to live elsewhere while your rental is being repaired, rebuilt or until you relocate. ALE coverage is usually limited to 30-50% of the total value of the policy. So, if your belongings are insured for $50,000, the ALE limit is $15,000-$25,000 depending on your policy.

Liability protection is also standard with a renters policy. This means if someone slips or falls in your apartment, your pet scratches or bites a neighbor, or you hit someone with a ball on the golf course, you’re covered up to your policy’s liability limits. This also covers a renter being sued, up to the limits of liability protection and includes legal expenses.

Additional Coverages
 to Consider

Damages caused by flooding and earthquakes are not part of a renters insurance policy. If prone to either, consider separate coverage that’s available through a flood insurance policy. Click here to assess your flood risk based on where you live.

Many companies also provide identity theft coverage for a nominal fee.

Cost of Renters Insurance

When pricing a policy, consider these options. There are two types of coverage:

  • Actual cash value coverage (ACV) will replace items at their value taking into consideration their depreciation over time, similar to a car. For example, that $500 futon purchased five years ago would be worth less if replaced today.
  • Replacement cost coverage, which costs a little more, provides reimbursement at the current market price for all stolen, damaged or destroyed items. So, the same $500 futon would be replaced with a similar one without depreciation. Your deductible would apply in either case.

The cost of renters insurance is also dependent on several factors, including the deductible you choose. The deductible is the amount you pay, out of pocket, on each claim. The higher the deductible, the lower the premium. Other factors include:

  • Housing location (rural vs. urban)
  • Your credit-based insurance score
  • Selected coverage limits
  • Policy endorsements
  • Pets
  • Etc.

Additional Tips for Renters (and How to Save Money)

These apply to homeowners insurance too.

  • Ask your insurer to explain policy limitations and what’s NOT covered. If a particular exclusion is something that you feel is needed, ask if coverage is available through an endorsement for an additional fee.
  • Know what you own. Take time to inventory your possessions, including computers and other electronics, CD/DVD collections, books, clothing, kitchen items, small appliances, sporting goods, jewelry, furniture, etc. You’ll quickly realize that replacing possessions may well be worth the cost of insuring them. A free online inventory program, Know Your Stuff, allows you to keep a list of what you own safely, securely and easily. Click here for more inventory tips.
  • Buy all of your policies (auto, renters, health, life, etc.) from one source to take advantage of a multiple policy discount. If you combine your auto and renters insurance with one company, the discount may actually cover most of the renters insurance premium.
  • Raise your deductible to a level you can afford – at least $500 if not more.
  • Maintain good credit. Good credit is one of the most effective ways to lower insurance costs. A good credit rating shows the insurer that you pay your bills on time, which means you’re less risky to insure – less risk leads to lower premiums.
  • Ask about discounts that might be available, such as a reduced premium for monitored security systems, policyholder loyalty discounts for remaining with a company for a set period of time, claims-free rewards, possible non-smoker or senior citizen discounts, etc.
  • Compare quotes and coverage from a number of insurance sources. Ohio has more insurance companies offering homeowners coverage than most states.
  • Notify your insurer about your college driver’s whereabouts. You may qualify for an auto insurance premium reduction if your college driver is away at school more than 100 miles, with or without a car.

Renters Insurance Facts and Figures

  • Your belongings are worth more than you may realize. According to State Farm Insurance, the average renter has over $35,000 worth of belongings not covered by a landlord’s policy.
  • The average US renters insurance policy costs $185. The average Ohio renters policy is $179, based on 2010 premiums. (Source: National Assn. of Insurance Commissioners, Dec. 2012)
  • A 2013 Insurance Information Institute poll conducted by ORC International found that 96 percent of homeowners have homeowners insurance, while only 35 percent of renters have renters insurance.
  • 35 percent of the US population live in renter-occupied units. Nine percent of Ohioans live in rental units. (National Multi Housing Council 2012 report)
  • The number of renters is steadily increasing.
  • Rented households are burglarized at rates higher than owned households. According to a June 2013 report, Household Burglary 1994-2011, (US Department of Justice, Office of Justice Programs, Bureau of Justice Statistics) the rate of completed burglary in 2011 was 18.3 per 1,000 households that owned the property and 32.7 per 1,000 households that rented.
  • According to 2011 MetLife Auto & Home’s safety poll, nearly 8 out of 10 people say they never leave their doors unlocked. However, 15 percent report using social networking sites to post updates when leaving their homes, and more than double that amount of younger Americans (aged 18-34) “check in” to locations and tweet about their whereabouts. While these social notices help friends keep tabs on friends, they provide tip offs to burglars—especially when updates indicate that a person is out of town or on vacation.

Additional renters insurance resources

Posted: August 14, 2013