America is fast becoming a nation of renters, and a new report from online Real Estate database Zillow reveals that renters are spending more of their incomes than ever before on rent. In fact, U.S. renters can expect to fork over 30% of their income on those monthly payments to their landlords. And in pricey markets like Washington D.C., San Francisco, or Los Angeles, renters spend more than 40% on rent each month.
So it’s no wonder just 37% of renters invested in renters insurance in 2014. Compare that to the 95% of homeowners with homeowner’s insurance, according to a 2014 poll by the Insurance Information Institute. The low rates of renters insurance make sense at first glance; less disposable income means less money for non-essentials. But a deeper analysis shows why many renters would benefit from upgrading insurance from non-essential to must-have.
Because renters are spending more than ever on monthly payments, that makes them more financially vulnerable to sudden emergencies. And renters insurance could provide a vital lifeline in times of crisis. So why aren’t more Americans taking advantage of renters insurance? Studies consistently show the public has very low levels of information about the service.
For instance, when Millennials were asked to guess the average price of renters insurance, 29% said $1,000 a year. In reality, average premiums are closer to $187 a year, with monthly payments between $12 and $30 a month. Not only that, but a 2015 survey from Princeton Survey Research Associates discovered that 37% of young people don’t buy renters insurance because they just don’t understand how it works.
That means insurance companies need to do more to attract the ever-expanding pool of renters. Without more information, consumers can’t make informed decisions about potentially beneficial insurance policies. Most people understand why they need to shop around for the best health insurance and car insurance rates, but unless more outreach is targeted towards young people, an entire generation of renters will go under insured.
