If your belongings are stolen or destroyed, the insurance company pays (minus your deductible). Essentially: Would you prefer to receive the dollar value of what you own (the “cash value"), or the cost of replacing it (which tends to be higher, as goods depreciate over time)? If you opt for the “replacement cost,” you'll pay a higher monthly premium. Insurance companies make this distinction between the kinds of compensation a policyholder receives after losses. Many insurance companies will give you a discount on your renters insurance if you buy it along with another policy - such as auto insurance - which is known as “bundling.” For consumers who live in high-risk states, Klamm said, “the first piece of advice is to get it - renters insurance - and then to consider cash value versus replacement cost." WHAT SHOULD I KNOW ABOUT ACQUIRING RENTERS INSURANCE? They also recommend landlords increase the uptake of rental insurance by making it a default expense for renters, which they would choose to opt out of, rather than opting into. They suggest states mandate grace periods for consumers who experience financial hardship and struggle to pay insurance premiums, to help renters keep coverage if they experience cash flow issues. The authors of the Financial Health Network report recommend structural policy changes. As renters typically have lower incomes, less wealth, and lower financial health than homeowners, the difficulties have a compounding effect. “Those living in high-loss states were more frequently financially vulnerable than residents of low-loss states.”įollowing a disaster, renters are not responsible for financing repairs to the building where they live, but still need to replace or repair belongings that are damaged or destroyed. “Losses from natural disasters are an equity issue,” the study’s authors write. The losses are incurred by flooding, hurricanes, landslides, and wildfires, among other unusual weather events, such as tornadoes. States with higher-than-average annual losses include California, Florida, Louisiana, Texas, and Washington, according to the Financial Health Network. “Some consumers prefer not to purchase insurance, especially if they are unaware of their risks or perceive their risks to be manageable.”Īsked why they choose not to purchase renters insurance, more than one in three polled said the cost was “too expensive” and they felt they had “no need for it,” according to the Financial Health Network. “The cost of insurance products can act as a barrier,” the researchers found. That number’s based on a policy for a hypothetical 30-year-old with $30,000 in personal property coverage, $100,000 in liability coverage and a $500 deductible, but coverage rates vary widely by state and policy choices. The average cost of a renters insurance policy in 2023 was $148 per year, or about $12 per month, according to the most recent analysis by NerdWallet. My youngest cried every night and begged to go home.”Įven though she had trained to handle insurance claims, Klamm found the process of re-acquiring possessions, communicating with the insurance company, and rebuilding her life grueling - and that's with a policy in place. “When I wasn’t driving or at work, I was working on the claim or shopping. Replacing the bare necessities is “all-consuming and exhausting,” Klamm recalls, of the days after the firestorm. While homeowners tend to have more financial stability, renters more often face the burden of losses without a financial cushion, she said.įor those who do acquire a policy ahead of time, which Klamm encourages, fire and many other “catastrophic events” are typically covered to a point, but most policies still exclude earthquakes and floods. In the wake of subsequent fires, including wildfires in California and other states, Klamm offers assistance to policyholders on recovering funds.
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