A recently published national telephone survey of 1,000 tenants indicates that 64.4 percent of these respondents do not have renters insurance coverage. Approximately 2 percent were not sure if they had a renters homeowners policy or not. The survey was conducted last year by International Communications Research (ICR)—an independent survey firm based in Media, Pennsylvania—for the Alexandria, Virginia-based Independent Insurance Agents and Brokers of America (IIABA).
It is amazing to think that nearly two-thirds of the estimated 81 million people in the United States who are tenants do not have the proper insurance coverage. This equates to vast amounts of uninsured assets and uncovered personal liabilities.
There are a number of reasons why these respondents do not procure homeowners coverage. They are discussed below.
Myth #1: Coverage Is Expensive
Many of these uninsured respondents believe that this insurance coverage is too expensive. However, renters or contents insurance, often written on the Insurance Services Office, Inc. (ISO) HO 4 Contents Broad Form, or the American Association of Insurance Service's (AAIS's) similarly titled Form 4, is quite inexpensive. According to the IIABA, the average premium is $12 per month for $30,000 in property coverage, $6,000 in loss of use coverage, and $100,000 in liability coverage.
This premium is actually far less than the price of three vente frappuccinos per month at Starbucks. Tenants can often save even more money on premium by choosing a higher deductible, such as $1,000.
Myth #2: Exposure Is Already Covered
Another reason many tenants do not procure a apartment renters contents policy is that they believe that their landlord's insurance covers their personal property. However, the apartment owner's policy covers only the apartment building itself and common areas and the apartment owner's liability. It does not cover the tenant's personal property or liability exposures. If the tenant's apartment burns to the ground, the apartment owner is not responsible for damage to any occupant's personal property.
This is why a renters contents policy for the tenant is essential. This policy provides nearly identical coverage for personal property as compared to the Homeowners 3 Special Form, commonly used to insure single family residences.
Some tenants, such as older college students, may also mistakenly believe that their personal property is automatically covered by their parents' homeowners policy. (This is normally the case for younger students living in college dorms because a dorm room is usually considered a temporary location.) However, if the older student's apartment is their permanent address, even though their parents may help support them, they generally are not considered an insured under the parents' homeowners policy.
Myth #3: Coverage Is Unnecessary
Many uninsured tenants are young people who may not realize the high value of their clothing, furniture, computers, stereos, and often extensive CD collections. This is particularly true as they get older and gradually accumulate more personal property. In addition, many tenants own valuable jewelry, which can be endorsed onto the renters contents insurance policy via the scheduled personal property endorsement.
Myth #4: Coverage Is Narrow in Scope
This policy also covers loss of use in the event of a destructive fire or another major loss. If there is a loss and the apartment is uninhabitable, the insurer would pay for the necessary hotel costs until the insured moves into another apartment.
In addition, the policy provides personal liability coverage. For example, if the insured, while operating his low horsepower outboard motor boat, negligently injures another boater, coverage applies under the liability section of the homeowners contents policy. Another type of personal liability claim might entail a guest tripping and falling inside the insured's apartment. Note that the liability coverage of a homeowners contents policy is nearly always identical to that of the homeowners special form.
Also, some tenants make improvements to their apartments, such as the addition of drapes and built-in cabinets. With the homeowners contents policy, up to 10 percent of the personal property limit for additions or alterations to the dwelling made or acquired at the insured's expense are covered. Thus, if the insured has $30,000 in personal property limits, he automatically receives $3,000 in coverage for any improvements or betterments he makes to the apartment.