How to Make Your Insurance Cheaper with a Renter’s PolicyJuly 19, 2018
The concept of multi-policy discounts is no new idea. Insurance companies have been incentivizing the packaging of policies for quite some time now. Homeowners who carry a mortgage on their property are required by their lender to carry insurance on their dwelling structure and since most homeowners have at least one vehicle, the pairing of Homeowners and Car Insurance policies is a pretty natural fit.
How Insurance Companies Justify Packaged Policy Incentives
Lower Statistical Risks
Insurance companies provide significant discounts for packaged policies and justify these incentives in multiple ways. Actuarially, or in layman’s terms “statistically speaking”, once someone owns a home, begins to build financial equity and assets, and gets married/starts a family, he or she typically becomes a lower risk driver. These insureds are, generally speaking, less likely to cause a catastrophic vehicular accident and so the lower statistical risk they present to the insurance company means that better pricing can be provided to them.
Secondly, insurance companies want to write an insurance policy for you and they want you to keep that policy for a long time. The reason for this is that there are substantially more upfront costs to writing and producing new policies than the maintenance costs of keeping existing policies on the books. It might take two, or more, policy terms before the revenue your insurance company receives from your premium dollars fully offsets the operating costs they incurred to put your policy in place. All of this matters because customer retention is an extremely important aspect of the profitability and solvency of both insurance companies and insurance agencies, alike. Customer retention rates are statistically increased when customers have more than one policy. So, incentivizing the purchase of multiple policies with the same insurance carrier through premium discounts is a way to increase the retention of profitable accounts.
Why Consider a Renter’s Policy?
At this point, you might be wondering what all of this has to do with Renters Insurance. Renters Insurance is very similar to a Homeowners Insurance policy. Often, the only significant difference is that a Renters policy does not have any coverage for the dwelling structure. Instead, it primarily offers coverage Personal Liability, the insured’s household contents, and additional living expenses incurred in the event of a claim.
Discounts for Packaged Policies
Similar to insureds who package their homeowners and auto coverage together with the same company, insureds who rent and subsequently buy a Renters policy along with their Car Insurance coverage are more likely to stay with that insurance company for more policy terms. As such, they become a more favorable, and generally more profitable, risk for the insurance company to insure. This means that many companies will provide similar discounts for insureds who buy a Renters policy and Auto Policy as they would for an insured who is a homeowner. Sometimes the multi-policy discount percentage may be slightly reduced, but it can still equate to significant savings. In fact, in some cases, it can even be cheaper than buying a Car Insurance policy alone!
For example, let’s consider a newly married couple renting a one bedroom apartment. For discussion purposes, we will assume that this couple has 2 cars, a dog, and that their personal belongings (clothing, furniture, kitchen items, sporting equipment, etc.) in their apartment total $30,000. For full coverage on their autos, their annual car insurance policy is costing them $700/car for a total of $1,400. They decide that they would like to insure their personal belongings through a Renters policy. The annual cost of their Renters policy equals $120. Since this couple now has multiple policies with the same insurance company they become eligible for a 10% discount on their Car Insurance policy which saves them $140 per year. Their total annual insurance cost comes to $1,380 – $20 cheaper than their Car Insurance was by itself. Now, they have Car Insurance as well as coverage for the loss of their personal belongings in a claim; all for less money out of pocket!
Personal Liability Coverage
The benefits don’t stop there. Their Renters policy gives the couple Personal Liability coverage in the amount of $500,000. Let’s assume they have some guests at their apartment and their dog happens to bite their friend’s child, resulting in some disfigurement, which leads to significant medical bills and some life-altering injuries. Had the couple not bought a Renters policy with Personal Liability coverage, they very likely could be responsible for paying these damages out of pocket, if the injured party decided to seek legal remedy for the bodily injury caused by the couple’s dog. Since they elected to purchase the Renters policy, the couple’s insurance company will pay to defend them in court, if the situation finds itself there, and will also pay up to a total of $500,000 of bodily injury damages to the injured party.
The couple in our example is in a better place financially, before a claim even occurs, because they bought a Renters Policy. And, they are in a MUCH better place financially if they were to suffer a loss to their personal belongings or if a Personal Liability claim occurred. So, even if you don’t own a home, ask about coupling a Renters Insurance policy with your Car Insurance coverage. It is one of the most affordable types of insurance and it can often help you save; sometimes in very big ways. Contact Ruhl Insurance at 717-665-2283 or 1-800-537-6880 for more information about Renters Insurance today!
Disclaimer: Information and claims presented in this content are meant for informative, illustrative purposes and should not be considered legally binding.