One of the first steps you take when buying a home is purchasing homeowners insurance. Similarly, one of the first steps you take when renting a home is getting renters insurance. Just because you don’t own the property itself doesn’t mean that damages are any less likely.
However, many people don’t get renters insurance because they feel they don’t need it. One of the main reasons being, that they think their landlord’s insurance will cover them, when in fact, a landlord’s policy typically only covers them and their property.
To protect your possessions, renters insurance is one of the most essential tools you can purchase to reinforce your financial stability. It can be fairly inexpensive as well, costing less than a dollar a day (averaging 15 to 30 dollars per month) depending on your provider, geographic location, and additional insurance policies you carry.
Renters insurance covers personal property and personal liability. So things like furniture, electronics and clothes, as well as medical expenses if a guest gets hurt while at your place, can be covered. Additionally, some policies will cover temporary living expenses if your rental property becomes uninhabitable.
Just like with H03 and HO5 homeowners insurance, not all situations are covered with renters insurance. If you’re looking for protection for natural disasters such as earthquakes or hurricanes, you will need to buy riders for additional coverage. If a natural disaster such as a wildfire, tornado, or hailstorm cause damage to the building, the landlord’s insurance will most likely cover the damage to the building, however, your personal property will probably not be covered, which is where your personal policy can come in handy.
Other riders can include sewer drainage damage (drain gets backed up and floods, ruining your possessions), extended theft coverage (items stolen outside of your home, such as a laptop from your car), and loss of use (living expenses if your property becomes uninhabitable).
Additionally, if you’re in a building with multiple units and you are responsible for an unnatural fire (i.e. you leave the stove on and a fire starts), you can also be responsible for the damage to the other tenants apartments including any of their property damage.
What types of coverage are there?
There are two types of coverage that renters insurance provides: personal property and liability. Personal property coverage covers repairing or replacing personal belongings in the case of theft or damage. Liability coverage covers you in the case of a claim or lawsuit if someone is injured or their property is damaged by an accident on your property.
Additionally, you can opt to get a broad form of coverage or a comprehensive form. The broad form is the typically the most common form purchased and is similar to HO3 coverage as it extends to specific events like fire or theft. Comprehensive coverage is more similar to HO5 in that it covers a more general range of events, with only specific exclusions.
Next, you get to decide if you would like actual cash-value coverage or replacement cost coverage. For actual cash value, your insurance provider will factor in depreciation before offering your claim amount. So if you bought a couch for 500 dollars five years ago, and now it is worth 300 dollars, your insurance company will compensate you 300 dollars.
For replacement cost coverage, your insurance provider will compensate you for the actual cost to replace the couch. So you would get 500 dollars for the couch, or however much it costs to get a comparable one. Replacement cost coverage typically has higher premiums than actual cash-value, but could save you some serious out of pocket costs down the line.
How much coverage should you get?
When deciding how much coverage you need you should evaluate a few things. First, take a look at your landlord’s insurance to see what they are actually liable for and what they will cover in the event of damage to the property. Additionally, take inventory of all of your possessions (beyond just those ‘big ticket’ items). It’s estimated that an average two-bedroom apartment contains about 30,000 dollars worth of stuff, which will be difficult to replace if something unexpected were to happen.
To save some money on your policy, look into installing a smoke detector, burglar alarm, and fire extinguisher to help reduce your risk of needing to file a claim. If you have roommates, check with them to see what their policies are and if you have the ability to purchase one together.
Why is it important?
Renters insurance is important because it can help protect you and your belongings from unexpected events. It also helps fill the gaps that other policies may lack. For example, if your car is broken into and your laptop is stolen, the window will most likely be covered under you auto policy, but the laptop probably won’t be. Your renters policy can help extend this coverage of your property.
Just because you don’t own the building you’re living in, doesn’t mean your other possessions are any less valuable, or your guests are any less accident-prone. Through purchasing renters insurance, you will be covered for personal property and liability claims throughout the duration of your rental experience, and you can do so without breaking the bank.