They might not seem like much to you, but these are big red flags to insurers.
Renters insurance isn't as complex as other types of insurance, and it's not too difficult for most people to get. This type of policy provides important liability protection for the renter, not to mention coverage for their personal property. But every application is not guaranteed to be approved. Here's a look at five common reasons an insurance company might deny a renter's application.
1. Location issues
The location of a home or apartment affects its risk of natural disasters. Renters insurance companies evaluate the likelihood of all sorts of natural disasters when setting premium costs. The same is true for homeowners insurance. Policies for higher-risk areas usually cost more because there's an increased risk the insurer will have to pay out a claim. And if the risk is too high, the company might refuse to underwrite the policy altogether.
For example, if a home or ground-floor apartment is located very near the coast in a region prone to severe flooding, that might make a company wary of insuring it. The same goes for a rural home that's far from the nearest fire station. If the rental were to flood or catch fire, the insurer would have to pay out a massive claim for the renter's belongings that were damaged or destroyed in the accident.
2. Home hazards
Certain items, like pools or trampolines, are considered safety hazards and can raise the cost of insurance. A pool may not be an issue for a renter if it's a community pool run by the landlord. But if someone is renting a private home with a pool, insurance companies might get worried.
If the renter were to invite guests over and the guest were to injure themselves, they could sue the renter. The renter would then have to fall back on their renters insurance's liability coverage, which could lead to a massive claim.
3. Pets
Renters need to clear their pets with more than just their landlord. Insurance companies usually want to know about them too. Certain dog breeds are known for being more aggressive and are more likely to bite people than others. This is another situation that could lead to huge liability claims against the insurance company.
Read more: check out our picks for best homeowners insurance companies
Some companies may get around this by offering to sell the renter insurance with a dog bite exception. This means that the company will pay out other sorts of liability claims, but it won't pay for any dog bite claims.
4. Prior rental insurance claims
As with any type of insurance, the more claims the policyholder has filed in the past, the more expensive their policy will become. And if they file too many claims, they may struggle to get coverage at all. Several rental insurance claims filed within a few years suggest the renter may not be responsible or that they take unnecessary risks.
Usually, when filling out a renters insurance application, companies will ask for a claims history for the previous three to five years. Exact requirements may vary depending on the state and the insurance company. Most insurers will want to know what type of claim the applicant filed, when it was filed, and how severe the incident was.
5. Lapsed coverage
Renters who previously had renters insurance but allowed their coverage to lapse may have difficulty securing new coverage. A lapsed policy suggests that the individual may not be responsible and may not be able to keep up with their payments in the future. This is a major red flag to insurance companies, which do all they can to minimize risk to themselves.
But just because one company denies an applicant doesn't mean they all will. The best move for a renter who's denied coverage is to explore other options. Check with a few other companies and compare rates side by side to see which offers the best deal.
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FAQs
Rental insurance companies can deny applications if they feel the applicant or the property is too risky to insure. Just because one insurance company denies a renter doesn't mean that others will.
What are 2 reasons people typically do not get renters insurance? ›
Many renters don't purchase renter's insurance, either because they don't think it is necessary or believe they are covered under the landlord's policy. The cost of renter's insurance is relatively low.
Which is a common reason why insurance claims are rejected? ›
The claim has missing or incorrect information.
Whether by accident or intentionally, medical billing and coding errors are common reasons that claims are rejected or denied. Information may be incorrect, incomplete or missing.
What are the 3 things renters insurance provides you with and what purpose does each of them have? ›
Renters insurance covers personal property, personal liability, medical payments and additional living expenses or loss of use, up to the limits of your policy. Learn more about what renters insurance covers and the types of renters insurance coverages.
Why do landlords want you to have renters insurance? ›
Unlike some other states, California landlords are allowed to require tenants to obtain and maintain renters insurance while they are under the terms of the lease. This is done in part to protect landlords from lawsuits in the event that damage to the property causes it to become uninhabitable.
Is a lapse in renters insurance bad? ›
The risks of a renters insurance lapse
The biggest risks of letting your renters insurance lapse are potentially large out-of-pocket expenses if your belongings are damaged or stolen while you are uninsured, but there are other risks to consider.
What does renters insurance actually cover? ›
Renters insurance is an insurance policy that can cover theft, water backup damage, certain natural disasters, bodily injuries and more in a rented property. If you rent an apartment, home or even a dorm, renters insurance is recommended for protecting your space and belongings in the event of a covered accident.
What are the cons of renters insurance? ›
Additional Expense
One of the main cons of getting renters insurance is that it can be an added expense for tenants who are already paying rent and other living expenses. This can be a deterrent for some tenants who may feel that they cannot afford the additional cost of a renters insurance policy.
Is it worth it to get renters insurance? ›
Renters insurance coverage is almost always worth it. It is much more affordable than other policies, including home or auto insurance, and provides valuable financial protection. Even if you can save enough money to cover unexpected loss, renters insurance may be worthwhile.
What are 5 reasons a claim may be denied? ›
Six common reasons for denied claims
- Timely filing. Each payer defines its own time frame during which a claim must be submitted to be considered for payment. ...
- Invalid subscriber identification. ...
- Noncovered services. ...
- Bundled services. ...
- Incorrect use of modifiers. ...
- Data discrepancies.
Dirty Claim: The term dirty claim refers to the “claim submitted with errors or one that requires manual processing to resolve problems or is rejected for payment”.
What are the three most common mistakes on a claim that will cause denials? ›
Here, we discuss the first five most common medical coding and billing mistakes that cause claim denials so you can avoid them in your business:
- Claim is not specific enough. ...
- Claim is missing information. ...
- Claim not filed on time (aka: Timely Filing)
Renters insurance policies are helpful in three ways: repairing or replacing your belongings if damaged, paying for living expenses if you're displaced, and covering damages to others.
What are the three major parts of a renters insurance policy? ›
Renters insurance has three basic coverage components: personal possessions, liability, and additional living expenses.
Does renters insurance cover moving costs? ›
Unless you're moving to relocate while your rental home is repaired due to a peril covered by your renters insurance policy, the cost of your move is not covered either. Licensed moving companies usually offer coverage for damage while they have your stuff. Third-party moving insurance is also available.
What are two statistics about renters insurance? ›
55 percent of U.S. renters, or 61 million people, currently have renter's insurance policies. This number could rise to more than 65 million within the next year. 75 percent of insured renters are required by their landlords to obtain renter's coverage.
How many people don't have renters insurance? ›
Only 57% of Americans that rent have insurance. However, because the average cost of renters insurance is only around $15.58 per month, it's strange that a greater number of individuals do not have coverage. We'll look at renter's insurance statistics and how Americans protect their rental houses in this post.
What happens if you don't have renters insurance and there's a fire? ›
Renter's insurance would protect you, even if the fire was do to your negligence. In most situations, your landlord insures his property but does not insure yours. Unless there is clearly demonstrated negligence on the landlord's part, you won't have much chance to recoup losses from him/her.
Why would someone want to have renters insurance if their building owner has insurance Quizlet? ›
Why would someone want to have renters' insurance if their building owner has insurance? The building owner's insurance only covers the building structure. Renter's insurance covers your personal property.
