Uninsured Young Renters: Nationwide Survey
When my parents were first married, they were uninsured young renters living in a small, one-bedroom basement apartment in the suburbs. It was their first apartment together and it was their goal to save up enough money to buy a house.
While they did buy a home eventually, they had a few financial setbacks because they were unaware of the benefits of renters insurance.
Living in that first apartment was met with many happy memories, but it also had a disastrous ending. While out to dinner one night, my parents came home to fire trucks lining the street outside of their apartment. Not knowing what had happened, my parents approached the building to get a better look. Upon closer inspection, they discovered what remained of their residence after an apparent fire in the upper-level apartment. While most of their possessions had been spared from the flames, almost everything they owned was lost to water damage from firefighters working to put out the blaze.
My parents had to completely start over: new clothes, new dishes, new furniture, new apartment. Since they did not have renters insurance, none of their items were covered in the event of fire or water damage.
Even though this unfortunate event took place over 30 years ago, it seems that young adults are still unaware of the benefits of renters insurance, and the consequences of not having adequate coverage.
In April 2014, Property Casualty 360 reported a Nationwide Insurance survey. This research included interviews of 1,000 people between the ages of 24 and 34: the millennial generation.
With the changes to the economy, more and more millennials are choosing to rent rather than buy a home. Between 2006 and 2011, a million additional renters in this age group began renting. Most concerning, however, is that over half do not have renters insurance.
Such a low rate of renters insurance purchases is partially due to misconceptions surrounding the cost and benefits. Below is a list of the common misunderstandings:
- 40% of respondents were unaware that renters insurance covers stolen property.
- One-third of the renters did not think that damage caused during a party would be covered. This included an injured guest or a broken personal item.
- 40% did not think it was necessary to have renters insurance, even though 68% said of the young adult renters said that the value of their current possessions was over $5,000.
Components of Renters Insurance
What’s most important is that the millennials understand what is covered in a typical renters policy. The first issue is cost. Considering the thousands of dollars in property items most renters own, the expense of renters insurance coverage is relatively minimal. Depending upon the location of your apartment, a typical policy costs between $250 and $300 per year. That’s about $20 to $25 per month in premium payments. Many insurance companies have bundling deals too, so if you have a car that needs to be insured, this will reduce your over all monthly renters insurance costs.
A second component of renters insurance is liability. The typical policy has $100,000 in coverage, although you can choose to increase this number if required. Liability protects against bodily injuries to guests visiting your apartment.
If your belongings sustain damage as the result of a fire or theft, an insurance policy would help to cover the cost. There are two different types of policies to choose from in this matter: replacement cost and actual cash value. The replacement cost option pays enough money to replace the damage item. If you own a couch that is 10 years old, it is probably not worth much and would cost hundreds of dollars to replace. The replacement cost policy would help cover this amount. The actual cash value option pays you for the value of your damaged possessions based on what they are actually worth. While it won’t cover everything, the premiums are much lower.
In addition to helping to cover the cost of your belongings, a renters policy would also help to pay for your living expenses while you look for a new apartment or wait for your current place to be restored to a livable condition. This includes your hotel bill or temporary rental payments, meals, and other expense incurred while waiting for your apartment to be repaired.
When considering the renters insurance best suited to your needs, keep in mind that a standard policy does not include coverage for floods. Also, expensive jewelry or fine art will also not be covered. A standard policy usually will only cover jewelry up to $1,000. In both instances, you should consider a separate policy or insurance rider.
That house contained my parents’ first apartment is still there. After 30 years, the fire and water damage is not noticeable anymore. We have driven by there on occasion, and my mom still speaks of the lessons she learned from not having the proper insurance.
Source: Enhanced Insurance Blog