The big insurance mistake millennials insist on making

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The big insurance mistake millennials insist on making

While homeownership has long been considered part of the American Dream, millennials are transforming this long-held societal norm. Due to the rising costs of real estate, job insecurity, student loan debt, a desire for freedom and more, homeownership rates continue to drop for those ages 18 to 34. But how low will it go? As of last year, only 34.1% of individuals under age 35 owned a home. That means the rest of millennials – nearly 65% – are renting or living with parents, relatives, or friends.

Many would argue their strategy is smart. By postponing homeownership – at least for a while – millennials can avoid the costly pitfalls of owning and focus on their other debts – all while having more freedom in their lives. But, there’s one area where millennials aren’t making the smartest move: They’re not insuring their personal property. In other words, they’re foregoing renters insurance.

Why are millennials skipping renters insurance?

According to a Nationwide survey, 56% of young adult renters don’t have coverage. The reason for foregoing renters insurance ran the gamut. More than 40% of young renters said they just didn’t need any. Plus, the perceived pricing of a policies plays a part in millennial’s lack of coverage, Nationwide says (more on this in a minute).

It’s also clear many millennials don’t quite understand how renters insurance works. Forty percent of young adults who told Nationwide they didn’t have coverage were unaware a policy would cover their stolen property, while 30% didn’t think party mishaps were covered. (They usually are, btw: Renters insurance generally comes with a certain amount of liability coverage that kicks in if someone gets injured at your place.)

Why millennials definitely need renters insurance

Millennials who want to rent instead of buying a home might be making the best decision for their finances, but avoiding renters insurance can easily be the worst financial decision they can make. Here are four reasons millennials (and all renters) need a renters insurance policy of their own.

  1. Your landlord’s insurance policy will not cover you. While many people assume their landlord has property insurance that will cover them in the event of a fire or natural disaster, this couldn’t be further from the truth. Landlord policies are unique in the fact that they only cover the building in question – not the contents. If you’re renting a home or apartment and the building you live in is burnt to a crisp or leveled by a tornado, your landlord’s insurance policy will step in to replace the structure — not your stuff.
  2. You need a policy that will replace your possessions. Everything in your rental home or apartment is your responsibility to cover, which is why renters insurance is so incredibly important. If your apartment is filled with garage sale furniture and not much else, then you may be able to argue against buying renters insurance. But, if you own anything of value at all, a renter’s insurance policy could pay for itself over and over again. What about your new MacBook? The new leather couch you saved for? The dining table you received as a wedding gift? Without renters insurance, you would have to replace these possessions and anything else you own since, again, your landlord’s policy covers your building only.
  3. Renters insurance may cost less than dinner at Chipotle. If you’re someone who has overestimated the price of renters insurance in the past, now may be the perfect time to consider buying your own policy. Protecting your possessions could cost a lot less than you think. In fact, the average cost of renters insurance amounts to about $25 a month. And some of the renters insurance policies offered through PolicyGenius start at around $8 per month — about what you’d pay for a delicious Chipotle burrito bowl with all the fixins. Come up with the cash for an extra bowl per month, and you’ll gain all kinds of peace of mind.
  4. You can save even more by bundling policies together. If you don’t have renters insurance but you carry other insurance policies such as auto insurance, bundling your policies with a single insurer could be a smart financial move. Insurance companies very often offer steep discounts when you use their company for all your insurance needs – renters or homeowners insurance, auto insurance, umbrella policies, and even life insurance. You can learn more about when — or when not — to bundle policies here.But, the key to using this strategy to save is getting quotes from several companies so you can compare and make sure you’re getting a good deal.

Got a few more questions about renters insurance you’re too embarrassed to ask? No worries. We’ve got more answers here.

Image: vgajic