According to the Insurance Information Institute, only 41% of renters own insurance, compared to 95% of homeowners (III). Why is there such a wide gap?
Since some renters don’t think of their apartment as their own, they often tend to forgo insurance. This line of thinking is flawed, since renters insurance covers personal property inside (and outside) the apartment. Renters also often wrongfully assume that their landlord’s homeowner insurance covers their belongings. If a thief broke into the renter’s apartment and stole a TV, the items wouldn’t be covered unless the renter had insurance.
We must ask ourselves is, why do insurance companies leave almost two-thirds of the potential market untapped? A remarkable 95% of homeowners pay a monthly premium, so why are renters such a hard nut to crack?
Renters Insurance is Good for Tenants, Even if They Don’t Know It
One can only assume that the majority of renters that don’t purchase insurance are on a strict budget; notably college students and twenty-somethings.
This conscious effort to avoid renters insurance is misguided for a few reasons. The first reason is, plain and simple, a lack of knowledge. Renters insurance is – for lack of a better term – cheap. In most cases, the fee is as low as $5 a month, easily affordable on any budget. The second reason is being misinformed about what renters insurance covers. Most renters aren’t familiar with what’s covered and even more importantly, what renters insurance doesn’t cover. Many wrongfully assume that renters insurance is nothing but a money grab. The third reason is the hardest one to dispute and it deals with the probability of something bad happening. It’s the oldest grievance in the insurance playbook – we pay insurance for years without anything bad happening.
So, how can insurance companies help renters understand that getting insurance makes sense?
Insurance Companies & Landlords Have a Shared Goal
Insurance companies are for-profit organizations. No one can fault them for trying to make a profit; at least no more than we can fault Nike for doing the same. Homeowner insurance carries heftier monthly premiums when compared to renters insurance, so insurance companies focus their efforts on homeowners. From the perspective of the insurance companies, if signing up a homeowner takes the same amount of effort as signing up a renter, then it makes more sense for the homeowner to be the one who signs the dotted line.
This logic is flawed and short-sighted. In the short-term it makes more financial sense to pursue the homeowner, but money-conscious renters stand to become homeowners one day. Why does that matter? Because renters with insurance are almost sure to stick with their current insurance company when they buy their own place. So down the road, the insurer will have to spend less time attracting new homeowners, which means lower costs and higher profits.
Homeowners that rent their property should try to convince their tenants to purchase an insurance policy for the sake of a peaceful landlord-tenant relationship. Since renters are often misinformed about who’s insurance covers what, things can take a wrong turn if there’s an unfortunate situation. Having both parties insured clarifies responsibilities and provides adequate compensation for damaged or lost goods, so there is no reason for one side to harbor hard feelings towards the other.
Landlords should also make it clear to their tenants that getting renters insurance is for their own benefit. For example, if a tenant accidently causes a fire in the building, the homeowner’s insurance will cover the costs of bringing the building back to its previous condition. If the tenant has renters insurance, it will cover the landlord’s deductibles, making everyone happy. Without renters insurance, the chances of a bitter dispute increase.
Time to Clear the Insurance Information Fog
With an informed, yet friendly approach and a simple signup process (insurance paperwork is notoriously tedious) insurance companies can increase the percentage of renters that decide to get insurance.
A good place to start would be to clear the information fog surrounding renters insurance. Since renters insurance is such an affordable and straightforward policy, clearly communicating the benefits should be simple.
If renters were made more aware of the benefits of renters insurance, they’d be much more inclined to purchase a policy.