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<p>We investigate how rental insurance deductible choices and rent affordability jointly affect demand for rental insurance and the value of risk reduction for hurricane-related power outages and property damages using discrete choice experiments. We tested five rental insurance deductible menus with increasing (4–8) number of choice options and maximum deductible ($2500–$10,000). Our experiment was administered to a random sample of multi-family renters across 11 states and data analyzed with mixed logit models. Our analysis reveals high preferences for low ($250 and $500) deductible plans and a high likelihood of a zero willingness to pay (WTP) for standby power generators and windstorm-resistant buildings. However, propensity to choose lower deductibles decreases non-linearly with an increase in the coefficient of absolute risk aversion (CARA), and WTP for power outage or property damage risk reduction increases with CARA and decreases as the percentage of income spent on rent increases. Overall, renters with higher levels of deductibles are more likely to pay for hurricane risk reduction actions. We show that an optimal range and number of deductibles exist that maximizes full coverage and minimizes under-insurance, and that a mandatory rental insurance program without constraints on the deductible range could simultaneously increase insurance take-up and underinsurance, muting the desired effects of the program.</p>

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Insurance deductible choice, rent affordability, and the value of hurricane risk reduction

  • 期刊论文

  • 发表日期：

    2026年4月21日

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  • Sebastain Awondo,
  • Lawrence Powell

摘要

We investigate how rental insurance deductible choices and rent affordability jointly affect demand for rental insurance and the value of risk reduction for hurricane-related power outages and property damages using discrete choice experiments. We tested five rental insurance deductible menus with increasing (4–8) number of choice options and maximum deductible ($2500–$10,000). Our experiment was administered to a random sample of multi-family renters across 11 states and data analyzed with mixed logit models. Our analysis reveals high preferences for low ($250 and $500) deductible plans and a high likelihood of a zero willingness to pay (WTP) for standby power generators and windstorm-resistant buildings. However, propensity to choose lower deductibles decreases non-linearly with an increase in the coefficient of absolute risk aversion (CARA), and WTP for power outage or property damage risk reduction increases with CARA and decreases as the percentage of income spent on rent increases. Overall, renters with higher levels of deductibles are more likely to pay for hurricane risk reduction actions. We show that an optimal range and number of deductibles exist that maximizes full coverage and minimizes under-insurance, and that a mandatory rental insurance program without constraints on the deductible range could simultaneously increase insurance take-up and underinsurance, muting the desired effects of the program.