Should You Purchase Renter's Insurance?
Do you like your laptop? How about your sofa? Could you afford to buy them again if a fire destroyed your apartment? Do you have a plan to replace your clothes and jewelry if an uninvited guest picks the lock on your door and "borrows" them?
No? Well then—you definitely need renter’s insurance.
What Is Renter’s Insurance?
Renter’s insurance protects your possessions if they’re damaged, vandalized, or stolen while you’re renting.
Simply put, renter’s insurance protects you from unpredictable catastrophes, like fires, electrical surges, and explosions.(1) Without renter’s insurance, you’ll go broke paying out of pocket for everything you lost in a fire or burglary.
But I thought my landlord’s insurance would cover me?
Sorry to burst your bubble, but your landlord’s insurance covers the brick and mortar building that you live in. It won’t cover the loss of your electronics, furniture, jewelry, sports equipment, or collectibles—no matter who’s at fault.
My roommate has renter’s insurance. So, I’m covered, right?
No. If your roommate has renter’s insurance, she has insurance for her—not you. Some insurance companies offer one policy for multiple roommates. And while this may seem like the easiest thing to do, you could find yourself in a poor situation, especially if one roommate makes multiple claims and your rate goes up because of it. That’s why it’s always better to have your own policy.
How much does renter’s insurance cost?
Renter’s insurance is dirt cheap, costing around $17 per month on average.(2) Even if you’re paying off student loans or saving for the down payment of your first home, you can put away 50 cents a day to insure $30,000 to $50,000 worth of stuff.
What Does Renter’s Insurance Cover?
A basic renter’s insurance policy will cover the following things.
Bikes. Kayaks. Computers. Whatever you own, renter’s insurance covers it. Like other types of insurance, you have to pay a portion—called the deductible—before your coverage kicks in.
For example, if you set your deductible to $1000 and you lost $3000 worth of stuff, you’d pay $1000 and your insurance company would pay the remaining $2000.
Most policies cap at a certain amount ($20,000 worth of coverage, for instance), so always ask your insurance agent to help you choose the right amount.
Renter’s insurance covers accidents that happen in your apartment. For instance, if your dog Tiny unexpectedly bites someone, or if someone slips on your floor and breaks his nose, renter’s insurance would help pay their medical bills.
And if you’re the humpty dumpty of your apartment, liability also covers clumsiness. So, let’s say you left the water running in a plugged bathtub and you flooded your apartment. Renter’s insurance would not only help pay to put things back together again, but will also pay for the damages you caused to your neighbors.
Additional Living Expenses
Imagine a fire has destroyed your apartment and you’re left without a roof over your head. Where do you stay? What will you eat? Renter’s insurance will pay for your lodging, clothes and even your food until you have another place.
So, you know renter’s insurance covers theft from your apartment—but did you know it also covers theft from your car? How about at the airport? Or even in Paris? Most policies will cover your stuff—no matter where you take it.
Storage Units Coverage
If you put your stuff in a self-storage unit that’s separate from your apartment, renter’s insurance will normally cover a portion of it. It won’t cover all of it, so ask your insurance agent how much coverage you will get. Most of the time, it’s about 10% of your total contents coverage. So, if you had $50,000 worth of contents coverage, you’d expect to have $5,000 in storage unit coverage.
Yep. If an electrical surge kills your refrigerator and spoils your chicken salad and frozen tuna steaks, your renter’s insurance would write you a check for your groceries.
What About Water Damage?
This is a tricky question. And to really answer this, we should break it into three parts.
1. Does renter’s insurance cover floods?
No. Unfortunately, if the creek rises and floods your apartment, renter’s insurance will not cover any damages. To be covered for a flood, you need a separate flood policy.
2. What about structural problems, such as leaky pipes and flooded toilets?
If you’re not at fault, then your landlord’s insurance should cover all structural problems. Now, if that leaky pipe got out of control and damaged your iPad and T.V., your renter’s insurance—and not the landlord’s—would pay for the damages.
3. What if I accidently flooded my apartment and damaged the electrical outlets?
If you accidentally flooded your apartment, renter’s insurance would kick in and clean up the mess (financially).
Is Renter’s Insurance Mandatory?
Unlike car insurance, renter’s insurance isn’t legally required to rent out a property. Landlords are, however, starting to ask tenants to buy renter’s insurance before completing a lease.
How Much Renter’s Insurance Do I Need?
You should have at least $100,000 in liability coverage, and if you live in a flood zone, you should buy flood coverage, too. Contents coverage depends on how much you own, so it will be different for everyone.
A good question to ask yourself is: If I lost everything, how much would I need to get back on my feet? If you’re still not sure, follow these three simple steps.
Step 1. Make an inventory of your stuff.
Take some time and create a list of everything you own. Yes. Everything. Socks, silverware, wall shelves, books, toaster ovens, mattresses. If it’s yours, add it to your inventory. Take pictures of more expensive items. That way, if there’s a dispute on your claim, you have evidence to back it up.
Step 2. Estimate the value of your things.
Once you have a good inventory, calculate how much your stuff is worth. Even if you think some things only amount to a hill of beans, add it to your calculations anyway. You’d be surprised by how quickly things add up.
Step 3. Work with an insurance agent to get quotes.
Once you know the value of your stuff, you’ll know how much coverage you’ll need. If you don’t already have an insurance agent, now is the time to get one. A good agent will take your inventory, pull quotes from reputable companies, and help you shop for a good price.
Take our 5-minute coverage checkup to make sure you have what you need.
Need Help Finding the Right Policy?
You’ve worked too hard to get your stuff to have it all disappear overnight. An independent insurance agent can help you find the right renter’s insurance without losing on coverage. Our recommended Endorsed Local Providers can give you dozens of quotes so you can save without losing on coverage. Find an insurance professional near you! Check out the original article by Dave Ramsey here