Please explain to me how renter's insurance is so cheap....

[TBickle]

In the apartment I'm living in, renter's insurance runs me $60 per YEAR for up to $16,000 in coverage. I got a discount because I also get auto insurance from the same company, but even without a discount it would still be about $90, which I still think is super cheap.

The question I have is, WHY is it so cheap? It just seems WAY too easy to stage a burglary and/or claim items stolen that you never even owned. For just a standard claim policy with no special riders, the insurance company doesn't come and inspect your belongings beforehand, and they don't necessarily require receipts for all your claims.

Now I'm certainly not advocating fraud or saying that I would ever do something like this, but it just seems to me that someone needing to raise some quick cash could pull off a renter's insurance scam pretty easily, and given that, why are premiums so low?

[Colonel Kataffy]

Are you sure your policy actually covers anything? Often times they don't.

[RR]

The claims just don't happen very often.

[TBickle]

Yea, I read the coverage detail, and pretty much everything is covered for theft, although some of the 'bigger ticket' items like jewelry, guns, etc., have a maximum coverage amount of say, $2k or $3k or whatever.

In fact, when I signed up for the insurance and told them that other than my tv and stereo system, and maybe my laptop, I don't really have anything else of high value, the salesman told me, "Well, then if you buy this minimum policy, it'll cover pretty much anything not nailed to the floor."

[RacersEdge]

For one thing there is a deductible. And if you claim an amount a lot more than the deductible, you will probably need to file a police report.

[JordanIB]

Do most people go through a well-known insurance company for their renter's insurance, or do you find something more local through recommendations?

I need to get it, and not sure where to go for best rates.

[TBickle]

Well usually if you get multiple insurances through one company (like i am with auto and renter's) they'll give you a nice discount.. but renter's insurance should be very inexpensive no matter where you go.. unless you have a crapload of valuables and/or you live in a high-crime area.

[bholdr]

renter's insurance appears to be cheap for several reasons:

A: it usually only has to cover your in-home belongings like your furniture, clothes, electronics and so on; not your plumbing, your land, your expensive hardwood floors, etc... if you're an average renter, you probably have less than 10k in property to insure (peanuts)- compare that to an avarage new car, say, 30k+... (hold that thought).

B: Adjusters can form a very accurate idea of their risks. your low rate may be due to living in a relitivly safe neighborhood, in a building with a good history and/or effective security measures in place (secure entry, on-site manager, and so on). I have a friend that lived in a BAD part of town, in an OLD building with minimal security, and he paid $17/month for $20k in coverage- 3+x your rate but still cheap.

C: some renter's ins covers cars parked at the residence as well- yours does not have to, since you have auto ins already.

D: getting convicted for fraud is VERY expensive, and anybody willing to commit ins fraud probably doesn't really worry about the initial investment.

[Sacramento Kevin]

[ QUOTE ]
In the apartment I'm living in, renter's insurance runs me $60 per YEAR for up to $16,000 in coverage. I got a discount because I also get auto insurance from the same company, but even without a discount it would still be about $90, which I still think is super cheap.

The question I have is, WHY is it so cheap? It just seems WAY too easy to stage a burglary and/or claim items stolen that you never even owned. For just a standard claim policy with no special riders, the insurance company doesn't come and inspect your belongings beforehand, and they don't necessarily require receipts for all your claims.

Now I'm certainly not advocating fraud or saying that I would ever do something like this, but it just seems to me that someone needing to raise some quick cash could pull off a renter's insurance scam pretty easily, and given that, why are premiums so low?

[/ QUOTE ]

I work for an insurance company as a product director - setting rates based on our loss experience.

The short answer was made earlier - there simply aren't that many claims that happen. The big dollar losses happen in homes - fires or wind damage when a large storm takes out roofs or fences.

As to fraud - you're right, it wouldn't be too hard to doctor up a false report. But good luck doing it a second time. Every major company subscribes to a database that shares loss history so they know what your claims have been. If you apply for insurance and they see a prior theft loss in the last 3 years, you might find a company willing to take you. If you have 2 or more theft losses, you have almost no shot of getting insurance. Plus - the claims adjustors review this information as well, so they can see that you've had multiple claims and red flags go off.

As for where to get renter's insurance - a number of the major carriers sell it directly online. If you're currently with an agent, give them a call - they can get it done in a very short time period. I always recommend working with an independent agent as they can research the rates for many companies. It won't make much difference for the renter's insurance, but many offer a discount when you have your auto insurance through them, and they might be able to save you money.

[Matt Williams]

People actually get this? I've rented for 10 years and never once thought of getting it.