The number of renters has grown dramatically in some of the most populous — and disaster prone — U.S. cities, yet few renters actually purchase insurance, according to the Insurance Information Institute.
In fact, only 37 percent of renters have renters insurance compared to 95 percent of homeowners who have hazard insurance, according to a 2014 I.I.I. poll conducted by ORC International.
The U.S. Census Bureau reports that in major cities such as New York, Los Angeles, Chicago and Houston, renters outnumber homeowners. These cities are also at risk from natural disasters such as hurricanes, flooding, earthquakes and severe winter weather, as well as fire, theft and vandalism.
So, where does that leave landlords?
“Many renters are under the misperception that their landlord’s insurance policy will reimburse them if their personal property is damaged or destroyed, but that’s just not the case,” says Jeanne M. Salvatore, senior vice president and chief communications officer for the I.I.I.
Tenants who are not insured are more likely to pursue their landlord for compensation. Those who don’t are still at risk for not being able to recover financially from a catastrophic loss. That means late rent — or no rent payments at all.
“Renters insurance provides a very important financial safety net when there is a disaster,” Salvatore points out. “And, renters insurance is relatively inexpensive—the average cost of a renter’s policy is only $187 per year, or less than four dollars per week.”
In fact, many property managers and landlords insist that renters protect themselves against losses by acquiring renters insurance.
Renters insurance can provide financial protection against damage to or loss of personal possessions due to hurricanes, fire, lightning, theft, explosion and other disasters listed in the policy. The I.I.I. advises that there is coverage for water damage caused by burst pipes or a neighbor who forgets to shut off the water in the tub. Renters insurance does NOT cover flooding and earthquake, but separate policies can be purchased for these events.
A tenant can purchase coverage for additional living expenses, in the event he or she is unable to live at home due to a fire or other insured disaster. It can include liability insurance if the tenant, a family member, or pet accidentally injures someone and sues.
Flood insurance is available from the National Flood Insurance Program (NFIP) and a few private insurance companies. It provides coverage for personal possessions on an actual cash value basis, generally up to about $100,000.
Renters can purchase insurance for damage to their personal possessions due to earthquakes from private insurance companies or in California from the California Earthquake Authority. Coverage is available either in the form of an endorsement or as a separate policy. Earthquake insurance provides protection from the shaking and cracking that can destroy buildings and personal possessions. Coverage for other kinds of damage that may result from earthquakes, such as fire and water damage due to burst gas and water pipes, is provided by a standard renters insurance policy.
An umbrella liability policy can be a cost-effective option for increasing a tenant’s level of liability protection. The policy kicks in when the limit on the renters insurance has been reached. It will also provide coverage for libel and slander. Umbrella policies generally cost about $150 to $300 per year and will also provide additional liability protection if the tenant owns a car, boat and even a snowmobile.
If a renter owns expensive jewelry, collectibles, musical instruments or even high-end sports equipment, they may want to add a floater or endorsement to the renters policy. This would provide broader coverage for risks such as “mysterious disappearance.” So even if a tenant loses the item, it would be covered.
For more information on renters insurance, contact the Insurance Information Institute at http://www.iii.org. Talking to tenants about renters insurance can deflect conflicts later, if disaster does strike.
This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).
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Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.