Millennials love to rent, but do they know how to get the coverage they need?
Insurance agents looking to make inroads among millennials can start by pitching a product that perfectly fits their current lifestyle: renter’s insurance. As of 2016, 65% of those under the age of 35 rented their homes. Likewise, 41% of households headed by someone between the ages of 35 and 44 were also renters, according to Pew Research. Those numbers mark a sharp rise from 2008, when the percentages were 57% and 31%, respectively.
To be sure, millennials are putting down a lot of money to rent their homes. RENTCafé, a rental apartment search site, estimates the average millennial will pay $92,600 in rent before they reach age 30. To them, the tradeoff is worth the freedom to move whenever they want without being tied down to a mortgage.
That doesn’t mean that apartment-renting millennials shouldn’t have coverage of their own, however. Insurance agents reaching out to this demographic can meet them where they live — so to speak — and help them understand how important it is to protect their homes and belongings even if they don’t own the property.
What’s Covered If the Worst Happens?
Although landlords typically cover damage to a building, that protection doesn’t extend to the contents of an individual apartment. For that, millennials will need a renter’s insurance policy.
However, many millennials might hold off on getting a policy they need because they don’t believe their belongings are worth that much. This assumption is often mistaken, with Allstate estimating that the typical renter owns about $30,000 in possessions. If they don’t believe it, have your client make an inventory of all they own and what they paid for each piece. Using that figure as a guideline, you and your client can calculate a coverage limit.
Renter’s insurance doesn’t just pay for lost items, however. If someone is injured at your client’s apartment, policies usually include liability coverage for related medical expenses. In addition, a renter’s insurance contract may reimburse policyholders in the event they need to stay elsewhere if their unit is in need of repairs.
Why Do You Think You Can’t Afford It?
Despite what many younger consumers think, renter’s insurance is surprisingly affordable. The Insurance Information Institute (III) puts the average renter’s insurance premium at $188 as of 2015, which comes out to around $16 a month. By shopping multiple quotes, you’ll be able to spot one at the right price for your client.
There are ways to bring that rate down even more. Some insurers offer discounts if renters install their own security devices, like security systems and smoke detectors (although they need to check with the landlord first). Setting up automatic payments can cut rates as well. Taking on a higher deductible also pushes down the premium, but your client would need to have enough saved to cover that amount.
Premiums are also calculated on the coverage limit option the policyholders select. If they pick actual cash value, they’ll be paid based on the replacement cost of the item, minus any depreciation. A reimbursement provision fully reimburses the piece’s value when the claim is made. While the second option bumps up the premium, it may be worth it if the renter owns some particularly expensive pieces.
How Long Do You Plan on Renting?
According to recent data, millennials don’t seem to be in a huge rush to buy homes. The U.S. Census Bureau found that in the fourth quarter of last year, the percentage of millennials who owned homes dropped to 35.3% in the first quarter, down from 36% in the previous quarter. While this may have to do with high prices, it shows that young clients — especially those who plan on renting for the time being — can’t afford to keep putting off the coverage they need.
For agents, this demographic trend presents an opportunity to work with clients in need of renter’s insurance — among other products. Once you’ve sold clients and prospects a renter’s policy, you’ll have begun a relationship that you can nurture as they marry, start a family, and, yes, finally buy a home.