If you were at risk of losing $5,000, $10,000 or even $15,000 and could do something to stop it, would you? Would you sit by and twiddle your thumbs, or would you leap into action and do something to protect your stash?
The answer is a no-brainer: you'd leap into action.
Yet according to a new study, more than half of adults ages 23 to 29 years old who rent their homes haven't bothered to take out renters insurance, putting all their stuff (and add it all up, you've got a lot of stuff) at risk.
Just as homeowners buy homeowner's insurance to cover their home and belongings, renters can and should get renter's insurance to do the same thing. A renter's policy will cover your personal possessions (clothes, electronics, furniture, etc.) if they're stolen and will pay to repair or replace them if there's a fire, burst pipe or other unfortunate event. Renter's policies can also pay for you to rent a new home or stay in a hotel in if you are displaced by a fire or other natural disaster — coverage that most policies refer to as "loss of use." (Coverage in the event of a flood is limited—more on that below.)
Like homeowner's insurance, renter's insurance includes liability coverage – so if someone is injured in your home, the cost of their care and of legal proceedings regarding their injury is covered up to your policy's liability limits, which is typically $100,000. (That's why if you own a dog with a dangerous reputation, like a Pit Bull or a Chow Chow, you may pay more for a renter's policy.)
But unlike a homeowner's policy that covers the home structure and its contents, renter's insurance covers just the contents of your home. That makes it a lot cheaper. Your landlord no doubt has an insurance policy that covers the building, but that does nothing to protect your couch, laptop, or other valuables.
Most renters don't have the cash sitting around to replace all their stuff. So why do so few buy renters' insurance? One reason: while homeowner's insurance is almost always required if you are paying for your home with a mortgage, there are no blanket rules or laws requiring that you purchase a renter's policy. (Some landlords do require it, but if you're not aware of such a term in your lease agreement, you likely don't have it.)
Another reason: "A lot of people are under the misconception that if they live in a studio, house, etc, that your landlord is going to be responsible for your belongings,'' says Loretta Worters, vice president of the Insurance Information Institute.
Indeed, a new survey from insurance provider Nationwide found that of the 59% of adults ages 23 to 29 who do not have renter's insurance, 46% didn't think they needed it. Another third said they thought it was too expensive and a quarter said they just hadn't gotten around to purchasing it. Yet 72% of all renters surveyed say their greatest fear, as a renter, is either a fire or a break in, and roughly 8 in 10 of those surveyed said they'd stand to lose $5,000 or more in the event of a fire or break-in.
"There's a screaming need for more awareness," says Matt Jauchius, Nationwide's chief marketing officer. "The average millennial carries $45,000 in debt, and we think for that reason as well as other societal trends, they're delaying a lot of life moments like marriage and home-buying, for several years. That means they're going to rent longer, but half of them don't have insurance and 8 in 10 will lose money… that, to me says, you're gambling. You're hoping a fire, a break- in or a theft doesn't occur."
Another reason younger renters don't immediately think to insure their stuff, Jauchius says, is that they underestimate the value of their possessions. Once they do the math, he adds, they're shocked by the full value of what they own.
Think you can't afford renter's insurance? Think again. Nationwide estimates that the average cost of renter's insurance is $20 per month — equal to the cost of ordering takeout one night. Worters says that according to the National Association of Insurance Commissioners' data the average policy cost just $184 per year, a figure that works out to a little more than $15 per month for coverage that ranges from $30,000 to $50,000 (depending on where the renter lives) with a $500 to $1,000 deductible.
Figures will, of course, vary from company to company. And unfortunately, there's no centralized Expedia-like site that helps you compare policy to policy: you'll have to run the numbers and compare the policies yourself. The good news, according to Jauchius, is that unlike health insurance, where unhealthy behaviors like smoking can affect your monthly premiums (i.e., what you pay for coverage), what you pay for a renter's insurance is largely based on the value of your belongings. (If you live in a high crime neighborhood that can boost premiums.)
The lower the value of your personal property – your laptop, clothes, furniture, kitchenware not including what came with the apartment (so if the oven and fridge were there when you moved in, no need to include those values in your tally), etc – the more affordable your coverage will be. Conversely, the more valuable the contents of your apartment are, the pricier your coverage will be. (This is why it's important to take stock of what you own before you start shopping for coverage. If you're not sure where to start, the III has a great checklist, as well as a free home-inventory tool that will help you track and assess everything you own.)
There are, of course, a few areas of risk and reward that insurance companies factor into the quote insurers give you. Safety features like deadbolt locks, sprinklers on site, fire extinguishers and smoke detectors will save you money; certain types of pets, meanwhile, could cost you money or even lead some insurers to decline to cover you. "Dog liability is a big issue today. It costs a billion dollars annually in [dog] injuries. Some companies are much stricter than others with dogs," Worters says. "It depends on their experience. If they've had a lot of claims with a certain breed, they might be reluctant to cover you. Others might say we'll cover you except for the dog – if the dog bites someone we're not liable."
Indeed, getting a quote from insurance provider Travelers involves answering the following question: "Do you own one or more of the following breeds or a mix of one of these breeds of dog? (Akita, Alaskan Malamute, American Staffordshire Terrier, Bull Mastiff, Chow Chow, Doberman Pinscher, Pit Bull, Presa Canario, Rottweiler, Staffordshire Bull Terrier, Wolf Hybrid.)"
All renter's policies should cover your belongings in your apartment and up to 100 feet from your apartment — to include damage or theft while you're moving, according to Mark Carrasquillo, an agent with E.G. Bowman Company, an independent insurance agency in New York City. Policies will cover your items whether or not you're home at the time of the vandalism, fire, burst pipe or other disaster that ruined your belongings.
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