Climate Disaster and Renters Insurance: Who’s Protected?

Among renters, the population with renters insurance tends to be more financially secure already than those without. Seventy-one percent of Financially Healthy renters have renters insurance, compared with just 32% of renters considered Financially Vulnerable (a group characterized by extreme challenges with both short- and long-term finances). As such, households that are already in difficult financial straits face outsized exposure to losses in the event of an emergency.

Racial disparities in renters insurance ownership are also vast. Black and Latinx households are more likely to rent (56% and 44% respectively) than white households (25%), yet Black and Latinx renters are far less likely to have renters insurance (37% and 40% respectively) than white renters (57%) (see Figure 1). Even after controlling for household income, Black and Latinx renters are less likely to hold renters insurance than white renters. 

Figure 1. Black and Latinx households are more frequently renters, but they hold renters insurance less frequently.
Renter status and renters insurance ownership, by race.

Notes: Rentership status calculated among full sample (N=5,474). Renters insurance status calculated among households who indicated that they rent (N = 1,556).
* Statistically significant relative to white households (p <0.05).

Even when households hold residential insurance, they are not fully covered for some natural disasters and weather events. This is true both for homeowners and renters. Most policies will not cover damage from earthquakes or from floods –  the most common and costly natural disaster in the United States, involved in 90% of natural disasters.^{17, 18}

Homeowners and renters can purchase separate policies for earthquake insurance, and they can access flood insurance privately or through the National Flood Insurance Program (NFIP). While hard figures are difficult to come by, renters appear less likely than homeowners to have such supplemental disaster insurance. The Financial Health Pulse® 2024 survey provides important early insight. This survey asked whether households have “natural disaster insurance (such as flood insurance, earthquake insurance, or other types of insurance meant to protect against damages from a natural disaster).” The survey found that 8% of renters vs. 25% of homeowners held any kind of disaster insurance, a statistically significant difference.¹⁹  

Several factors appear to contribute to low rates of coverage among renters. For one, homeowners with properties in areas at high risk of flooding are required to have coverage as a condition of a government-backed mortgage.²⁰ Information is also a significant challenge: Renters may not know what their landlord or renters insurance policy will cover or may underestimate their disaster risk.^{21, 22} In many states, home sellers are required to provide home buyers with information about flood risk, but few states extend the same disclosure requirements to renters.²³ As a result, most tenants receive no information about flood exposure, leaving them in the dark. Finally, disaster insurance is a supplemental expense that may be out of reach for renters who are already cost-constrained.

Renters insurance is a critical element in helping renters protect against risk. Yet, many renters in America, frequently people of color and those living on low incomes, lack any renters insurance, leaving them exposed to potential financial losses in the event of theft or emergency. And even those who do have coverage may not have the necessary protection from floods and other disasters.  

Our data suggest several opportunities to better protect renters from financial losses: 

• • Increased Awareness. Renters would benefit from better and clearer communication about the affordability and benefits of renters insurance, as well as more proactive communication about their climate risks. Insurance companies, other financial service providers, governments, and local organizations could all play a role in communicating risks. For example, New York state recently mandated that landlords disclose flood risks to prospective tenants in their leases.²⁴ Community and nonprofit organizations, as well as governmental hubs like the post office or Department of Motor Vehicles, could also serve as centralized communication points.²⁵  
  • Accessible Products. Further innovation is needed to provide low-cost, easily accessible support to families when they need it. The growing arena of parametric insurance is one potential avenue.²⁶ Parametric insurance refers to a type of insurance policy that pays out a predefined amount of money when certain parameters are met, like the level of rainfall or wind speed. Its design enables homeowner and renter policyholders to receive rapid payouts without lengthy claims processes. 
  • More Equitable Coverage. Many renters may not have the resources or the agency to make the mitigation upgrades that would better protect their units from climate disasters. The resources from programs such as the Green and Resilient Retrofit Program, aimed at HUD-supported properties, provide one mechanism to incentivize landlords to make investments that reduce risk exposure.²⁷ Some state and local entities have also invested in parametric products intended to support entire communities after climate disasters, helping them rebuild faster and at lower cost.²⁸  

Many renting households today face the extraordinary challenge of preparing for uncertain events at a time when rents are particularly burdensome. Insurance is one way renters can protect themselves against shocks, but our data show that the people who arguably need it most are less likely to have it – and that many who do have it remain exposed to certain climate disasters. Addressing these gaps requires innovations in product, marketing, and policy, which could help forestall even greater financial catastrophes for families and communities alike.

Survey data, unless otherwise noted, are drawn from the 2024 FinHealth Spend survey, with data collected between January 3 and Feb 3, 2024, using the Understanding America Panel. Understanding America is a probability-based panel of consumers age 18+ designed to be representative of the U.S. population. The study included responses from 5,509 consumers from unique households (margin of error +/- 1.3pp), including 1,556 renters (margin of error +/- 2.5%).

Data about renters and homeowners covered by disaster insurance is pulled from the 2024 Financial Health Pulse® survey, which was collected between April 16 and May 30, 2024, and includes responses for 7,245 households (margin of error +/- 1.15%).