A recent study from the University of California, Berkeley found that while Americans were more likely to consider renting a home, they were more apt to be willing to pay a premium to get one.
The average monthly premium for renter insurance rose to $1,100 from $900 in 2015, according to the study.
It found that the average annual cost of a renter home insurance policy increased from $3,300 in 2015 to $4,200 in 2020, and was expected to continue rising over the next five years.
A renter’s home insurance premiums for a three-bedroom home increased from a typical $3.5 million in 2015 dollars to $6.8 million in 2020.
A three-bed house insurance policy with a monthly premium of $1.5-million was expected in 2020 and was estimated to increase to $2.3-million in 2025.
While many renters are choosing to buy homes to be closer to their families, many also are choosing not to pay premiums for renters insurance, as it was not included in the 2016 federal government-mandated mortgage relief.
“I just don’t feel that there’s a benefit,” said John M. Sturgis, a San Francisco-based real estate broker.
“There’s a big gap between the cost of what a renters policy is and what it actually is.”
A typical renter household costs $20,000 a year to insure, according the National Association of Realtors.
The study estimated that about 75% of renter households paid more than 20% of their annual income toward their policy, which is estimated to be $7.6 million in 2019.
In 2020, the average renter policy cost $4.5m, but only about 8% of renters paid that amount.
The majority of renters who do pay the premiums are looking to move out of the housing market and into a new home, rather than buying a house.
In a 2015 survey of 6,000 renters, almost half of respondents said they would prefer to buy their own home, and about 35% said they were considering it.
The median cost of renters homeowners insurance premiums in 2019 was $3 million, and the average monthly cost was $1 million.
For a three bedroom home, the cost rose to about $7 million, with a typical monthly premium topping out at $1-million.
A standard three bedroom house insurance with a standard monthly premium was expected for 2020, but was projected to reach $3- million in 2025, according a report from Equifax.
For most renters, renter policies are typically a good investment.
A 2017 survey of renters in the Greater Boston area by brokerage Cushman & Lardner found that renters were nearly twice as likely as homeowners to purchase their own homes.
A typical homebuyer in the Boston area pays about $1m in renter premiums, the survey found.
For comparison, the median price of a house in the Washington, D.C. area is about $6 million.
The number of rener homeowners in the US is expected to reach about 6 million by 2030, according Cushmann &: Lardners estimates.
“They’re the biggest market out there,” said Charles W. Oster, the president and chief executive officer of the National Rent Guidelines Council.
“That’s what the market is looking for, and they’re the largest group of people who are going to get the most bang for their buck.”