Though renters insurance has its shortcomings, the price of renters insurance is typically worth it for most people who rent a home, even when it’s not required by a landlord. It is relatively cheap, and it provides valuable financial protection for damage to your belongings, injuries or damage you cause, and certain other expenses. Here are key things to consider as you decide whether renters insurance is worth it for you.
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What makes renters insurance worth getting?
The relatively inexpensive cost of renters insurance and the combination of coverages it provides are the main factors that make renters insurance worth getting for most people.
The average cost of renters insurance is $20 to $30 a month, depending on where you live and the amounts of coverage you choose. If you bundle your renters and car insurance, the multipolicy discount that most insurance companies offer makes it more affordable.
A standard renters insurance policy includes the following coverages:
- Personal property, or contents: Covers your belongings if they are stolen or damaged by a covered peril, such as a fire, hailstorm, burst pipe or fallen tree, after you pay your deductible.
- Additional living expenses (ALE): ALE covers increases in your lodging, food and other living expenses if a covered peril leaves your rental unit temporarily uninhabitable.
- Personal liability: Covers injuries and property damage you accidentally cause.
- Guest medical: Covers medical treatment for a visitor injured in your home.
Of all the coverages included in standard renters insurance, personal liability coverage may be the most valuable. After all, we live in a litigious society and accidents can happen anytime.
For example, if you start a kitchen fire in a vacation rental or your dog injures someone at the park, you may be responsible for tens of thousands of dollars for repairs or medical treatment. Even if the owner of the rental unit or the injured person may not want to sue you to recover their expenses, their insurance companies probably will.
The liability coverage in your renters insurance policy can cover these expenses and the costs of defending you in court, so you don’t have to pay for them out of your own pocket.
Your personal property coverage is also important, because it can save you thousands of dollars if your possessions are stolen, damaged or destroyed. Similarly, your ALE and guest medical coverage protects your wallet from other potentially significant costs.
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Renters insurance limits and exclusions
Although renters insurance protects against a broad range of risks, here are the key renters insurance limits and exclusions to know about:
- Renters insurance typically includes sublimits of $1,500 for jewelry and similar amounts for certain other valuables, such as furs, camera equipment and firearms.
- Renters insurance does not cover damage from earthquakes or floods.
When should I get renters insurance?
The pricing structure for renters insurance makes it worth getting whenever you rent a home from someone else, regardless of your stage of life.
The amount of personal property coverage you chose, which reflects the combined value of your belongings, is one of the primary factors that determines your renters insurance rate.
If you have a sparsely furnished home, you’re likely to pay less for renters insurance than a customer with a home filled with expensive furniture and electronics.
How much less?
Our research shows that the average price of renters insurance for someone with a $10,000 personal property limit is $132 a year, or $11 a month. For comparison, the average rate for a customer with a $75,000 personal property limit is $24 a month.
If you can afford to buy a lot of stuff, you can probably afford the relatively low cost of renters insurance. If you don’t have much stuff, you are likely to pay a lower rate.
When is renters insurance not worth it?
Renters insurance may not be worth it if the combined value of your possessions is less than a few thousand dollars and you can get a cheaper rate for stand-alone personal liability insurance.
The specific dollar threshold for personal property varies by individual. As a general rule, if the combined value of all your belongings is less than the cost of three to five years’ worth of renters insurance, you may not need renters insurance.
If you do forgo renters insurance, it’s still worth purchasing stand-alone liability insurance. Otherwise, your personal assets and/or future wages could be at stake if you accidentally injure someone or damage their property.
How much renters insurance is worth it for me?
Creating a personal property list and assessing your own net worth can help you decide how much renters insurance is worth getting.
The personal property list should itemize the value of each of your possessions, including your furniture, clothes, gadgets, gear and other belongings. At minimum, the personal property limit you choose for renters insurance should match the combined value of the items on your list.
Once you’ve created your personal property list, you can turn it into a home inventory by adding details about each item or set, such as purchase dates, locations and prices.
If you ever have to file a claim, having an updated home inventory handy, along with receipts and photos of your items, can expedite your insurance payout.
The limits for the ALE, liability and guest medical coverages in renters insurance are typically offered in default amounts, but it usually does not cost much to increase them.
- The default limits for ALE typically range from 10% to 30% of your personal property limit, depending on the insurance company. You’re generally better off with a limit on the upper end of this range.
- Renters insurance often includes up to $100,000 in liability coverage. If you have a high net worth or high salary, it’s usually worth getting a liability limit of at least $300,000, which may only add $5 to $10 to your monthly insurance rate, depending on the company.
- A common default limit for guest medical coverage is $1,000, and this is usually enough. However, it usually does not cost much to bump this up to $5,000.
When is it worth adding coverage to my renters insurance?
It may be worth adding coverage to your renters insurance if you own certain high-value items, want extra protection for your possessions and/or live in an area susceptible to earthquakes or floods.
Personal property insurance additions for renters
Standard renters insurance provides limited coverage for valuables such as jewelry, but most insurance companies offer riders or other options to increase coverage on high-value items.
Standard renters insurance typically also covers your possessions at their actual cash value, which is the value of each item after depreciation. However, many companies offer a replacement cost upgrade, which pays to replace lost items with new ones.
If you experience a major loss, the difference between actual cash value and replacement cost coverage can add up, particularly if you have $30,000 or more in personal property.
Earthquake and flood options for renters
Renters insurance does not cover earthquakes, but some companies offer an earthquake endorsement for an extra fee. In some states, earthquake insurance for renters is also available on a stand-alone basis.
Earthquake insurance for renters typically covers your belongings and ALE. As a tenant, you are not responsible for earthquake damage to your building. However, ALE coverage comes in handy if you need to rent a temporary home while earthquake damage is being repaired.
Flood insurance is available to renters on a stand-alone basis from the federally managed National Flood Insurance Program (NFIP), and a few private insurance companies offer it, too.
Flood insurance for renters generally covers your belongings at their actual cash value. NFIP does not offer ALE coverage, but some private flood insurance companies do.
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