AA Insurance survey highlights worrying trend among younger tenants

The 2019 AA Insurance Lifestyle Survey found that one-third of Kiwi tenants do not have contents insurance, compared to 92% of homeowners, yet claim data shows that over the last 12 months renters have made five percent more claims than owner-occupiers.

Tenants saving money by not being insured are living in a false economy, according to AA Insurance (AAI).

The 2019 AA Insurance Lifestyle Survey found that one-third of Kiwi tenants do not have contents insurance, compared to 92% of homeowners, yet claim data shows that over the last 12 months renters have made five percent more claims than owner-occupiers.

“The Lifestyle Survey has highlighted a worrying trend among predominantly younger tenants,” says Aaron Dickinson, Head of Product, AA Insurance. “Not only are younger renters less likely to be insured but, our claims experience shows, there’s some confusion around what contents insurance covers and what it doesn’t.”

Contents insurance covers the contents of your home, such as furniture, clothes, appliances, tools and sports items. It can also include cover for personal liability, which covers the policyholder for damage to other people’s physical property – such as damage to a rental property.

Contents insurance policies have different levels of cover for certain items, such as replacement cover (where you get a new item or the nearest available equivalent) or indemnity cover a.k.a market value (where you get the reasonable retail value of your item immediately before it was damaged or lost).

1.1 Personal liability

“There’s a misconception that contents insurance is just for your items, when in fact, legal liability is a strong reason for young people, and especially renters to get contents insurance. Uninsured tenants can be left vulnerable to hundreds, sometimes thousands, of dollars of debt if they are liable for damaging someone else’s property,” says Aaron.

The survey showed those aged 45+ were significantly more likely to have their contents insured (70%) compared to those aged 18-29 (57%) and 30-44 (58%), yet two percent of renters mistakenly believed they were covered under their flatmate’s contents insurance, while another two percent didn’t know if they had insurance at all.

“Without insurance, you would need to pay for the damage out of your pocket, cent by cent. And that’s on top of the cost of replacing your own belongings. While it’s easy to believe you will save money by not having insurance, it’s really a false economy because the cost to cover property damage and replace all your items, is often more than the price of a premium. Even a small amount of debt could put a strain on finances, especially for younger tenants who are just starting out.”

One customer was covered for the $1,100 worth of damage she accidentally caused to her flatmate’s car, when the wind caught the shed door she was holding and hit the vehicle’s paintwork.

For tenants who carelessly damage their landlord’s rental property, the new Residential Tenancies Act (RTA) No. 2 requires them, not the landlord, to pay either the landlord’s insurance excess or four weeks’ rent, whichever is less, for fixing the damage.

1.2 Greater risk for renters

One-third of New Zealand households are now in rental accommodation, according to Statistics New Zealand. This has seen an increase in rental properties being family homes rather than temporary flatting situations. The Ministry of Justice reports that rented homes are at greater risk of burglary than owner-occupied homes.*

“Despite half of all tenants saying they checked the security of the house before moving in, thieves will always look for an opportunity to enter a home and take items,” continues Aaron. “Even if you don’t think you have enough to insure, the cost of stolen or damaged items quickly mounts up, especially if these items all need to be replaced at the same time.”

One customer found the garage door of his rented property open one morning, and his ute broken into. Overnight, thieves had taken $38,000 worth of belongings that were stored inside the vehicle including expensive tools and a mountain bike.

Another customer was thankful she was insured when her rental home had been broken into. Her flatmate noticed that the front security door was open, with a hole in the net mesh. All other doors and windows were also open. Our customer returned home to find her clothing strewn across the floor and $43,000 worth of jewelry stolen.