Renter's folly

Ransacked HouseTenants are dicing with disaster by failing to take out contents insurance.

 
There are more than 4.5 million renters in Australia and many are the proud owners of expensive items including computers, mobile phones, televisions, designer clothes, furniture, jewellery, antiques and collectibles, bikes and sporting equipment. Yet few bother to insure their possessions, possibly leaving themselves exposed to financial hardship if disaster strikes.
 
Research by the Insurance Council of Australia (ICA) reveals that 74 per cent of renters do not have contents insurance, compared to just seven per cent of homeowners. At the same time, renters are twice as likely to need to make a claim for theft or burglary.
 
Swiss Re recently undertook a study with MBA students from Sydney University to investigate why so many renters do not take out insurance. The reasons for failing to take out cover included:
  • it wasn’t something they thought about
  • the belief that “it won’t happen to me”
  • products available were not suitable
  • misconception about coverage
  • cost.
Many renters assume that their landlord’s insurance will cover their possessions in the event of a fire or burglary, but this is not the case. Although the home may be insured by the landlord (landlord cover, building cover or strata cover), that cover does not extend to home contents owned by the tenant. A landlord is only liable for a tenant’s losses if they are found to be negligent in some way.
 
For a tenant’s possessions to be covered in the event of loss, tenants need their own contents insurance. Renter’s insurance generally offers around $20,000 in contents cover. While some renters think cover for such an amount is excessive, it is often because they underestimate the value of their assets.
 
It is estimated that when a person first moves out of the family home into a rental they have about $15,000 worth of possessions – this rapidly climbs as they accumulate more over the years. Admittedly, some renters are less likely to have the same quantity of furniture or ‘home wares’ (appliances, kitchenalia etc.) as a homeowner, but they are just as likely to own electronic goods (think the i-suite – pads, phones, pods, macs – laptops, mobiles, gaming consoles, stereo etc.) and personal goods such as clothing, accessories, books, bedding, bikes, jewellery and the like. In fact, Money Magazine reported that one in five renters admit to owning an item in their wardrobe worth $1,000 or more and about one-third value their wardrobes at over $5,000. And while many think they “have nothing worth stealing” and therefore insuring, if their possessions are damaged or stolen the cost to replace those items quickly adds up.
 
One of our recent TenantCover claims highlights the value of renter’s insurance. A policyholder’s home was broken into and some of their contents were stolen. Amongst the items pilfered were an SLR camera, a MacBook computer, a $5,000 clarinet and even their diabetes medication. The claim totalled $10,500 and the policyholder was fully compensated as they had proof of purchase/ownership for all the items being claimed and had specified the full replacement value of the clarinet when taking out the policy.
 
When it comes to renter’s contents insurance, cover is generally not only for their possessions. An aspect of insurance that so many fail to appreciate is that of liability. Granted the owner of the property is responsible for ensuring that the home is properly maintained and safe, and would be liable if the tenant or their guest was injured on the premises as a result of negligence etc. Despite this, there are circumstances where liability for losses falls to the tenant (known as occupiers’ liability).
 
A tenant can face liability for damage or injury if they fail to maintain a safe environment for anyone that comes onto the property. Medical costs, lost wages or business earnings, compensation for pain and suffering, and even legal costs can all be awarded to someone injured on a premises – and be footed by the tenant if they are derelict in their duty of care.
 
TenantCover provides up to $25,000 to cover loss or damage to possessions and up to $10 million in liability cover (tenants requiring a higher level of property cover or to specify items should consider more extensive contents insurance). While landlords and PMs can’t force a tenant to take out contents insurance, they can explain the value of the cover and make sure they understand that their possessions are not covered by the landlord’s insurance to help them avoid finding out the hard way after they suffer an uninsured loss.