There are several phenomena in our Western culture which are changing the landscape of homeowner insurance.


Young American are putting off home buying until much later in their lives than their parents. Some millennials even voice that the baby boomers’ “American dream” of owning your own home may be dying with that generation.

The unemployment rate for 25-34 year olds hovers around 4.1% according to Bureau of Labor statistics, making homeownership out of the reach of these younger potential home formations. Also, according to census data, from 1997 to 2007 1.2 million households were formed each year, yet over the last five years the average rate of household formation has declined to about 600,000 per year.

Mortgage rates are at historic lows, yet rising home prices and tightening mortgage standards, combined with the still challenging state of employment and the millennials paying off huge amounts of student debt, are other factors discouraging home purchase according to Dean Baker, co-director for Economic and Policy Research in Washington, D.C.

Divorce rates are also having an impact on homeowner insurance. Families are breaking up, causing homeowner insurance policies to be revised to reflect the adjusted relationship. One or the other of the divorced parties must seek a new policy.

Foreclosures have a chilling effect on homeowner insurance policies as well. Mortgage companies are having to pick up the payment of premium on those houses which are being foreclosed, and the parties being foreclosed against must attempt to adjust their policy from a homeowner policy to a tenant homeowner policy with its provisions.

People are still getting married, moving in with another person to help share the costs, cohabiting, or just staying in parents’ basements.

One more phenomenon which isn’t isolated to tenants or renters is the number of “toys” people are accumulating which require insurance protection–the snowmobiles, jet skis, trail bikes, trampolines, fishing boats, etc.

Insurance Industry Response Positive

All of the above renters or tenants still have the same insurance needs as brick and mortar homeowners–they just don’t have the brick and mortar exposure. What used to be a small segment of the insurance companies’ market is now a major player. Tenants who were looked upon by insurance companies as being less than good risks are now being recognized they as being more than second rate exposures. It is quite common anymore to turn on the TV and be treated to an advertisement showing the need to cover your risk as a tenant.

The coverages needed by this growing group of potential insureds is the tenant homeowner policy, commonly referred to by insurance professionals as a HO4. This reflects coverages for people who are tenants of rentals of any kind other than condominiums and some townhouses belonging to a homeowner association. Those occupants are covered with a HO5 policy which has at least one distinct coverage not found in a HO4. The HO4 needs only to cover the tenant’s personal belongings and personal liability, whereas the HO5 covers everything from the interior walls to the interior betterments, i.e. bookshelves, walls, doors, built-in appliances, etc. along with personal belongings and personal liability.

Tips for Choosing the Right Renters Insurance

If you find yourself as a tenant homeowner, you can rest assured your need for insurance protection can be adequately met. Couple of tips:

  1. If you have a choice between renting a frame structure, mobile home, brick or metal structure, you will pay less for your insurance if you go with the brick or metal.
  2. If you have a choice of locations, pick the one with fire protection class of lowest rating. Fire rates are based on protection classes with 1 being the lowest all the way to a 10 or unprotected zone:
  3. If you have a choice, package your automobile, snowmobiles, boats, etc. for package discounts.
  4. If you have a “significant other,” make sure when your tenant policy is written that person’s name appears on declaration page of the policy along with yours. Most policy language states an insured means you, or the entity named in the Declarations; but with this being a gray area which may cause problems down the road, be sure to discuss this issue with your agent so you can avoid any unpleasantry in future.
  5. If there are vehicles or other “toys” commingled, be sure titles are in the names of all parties concerned. Don’t make the mistake of thinking since you live in the same household and at the same address your policy will extend to those other occupants.
  6. If there is any uncertainty on your part, it may be wise for each party to maintain their own personal policies. Life does have a way of changing, so to assist in getting insurance in their own name down the road, they should keep personal policy.
  7. If you have a choice of actual cash value or replacement value on personal belongings, spend the little extra premium and purchase the replacement value. This eliminates any concerns at the time of loss about how old the items may be, the condition of lost items, or how much you originally spent to purchase items. It simply requires you pay your deductible and actually replace items lost.

An agent cannot alter or modify a homeowner policy so take the time at the beginning to establish a good working relationship by asking questions and giving the agent sufficient time to answer them for you.

One more note of caution, be careful you don’t purchase anything on price alone. Make sure you are getting coverages you need within the framework of your budget and within the environment you want to be in if there is a claim. Require yourself to stay informed and keep your coverages updated. If you move, let your agent know so coverages can be maintained at proper locations.

Oh, the joy of renting! While you are out golfing this weekend, your landlord will be over at your place fixing the leaky sink, repairing the driveway, and mowing the lawn. By the way, while he is there have him replace the hot water heater too!