Renters Insurance Basics

Even though renters insurance is affordable, helpful and sometimes required, most renters (and leasees) make the mistake of not buying a policy.

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What is Renters Insurance?

As its name implies, renters insurance is intended for people living in a housing unit that they don’t own. If anything disastrous were to occur to the property, the landlord’s insurance would typically cover the structure as well as their owned assets, such as appliances not purchased by the renter.

However, the renter would not have any of their own personal possessions covered. Anything valuable destroyed in a disaster would be a total loss with no hope of recompense. Even worse, the living expenses of the renter in this situation would be their own financial responsibility.  While the house was being rebuilt, the tenant would be forced to pay expenses out of pocket — sometimes even if the disaster occurred as a result of owner negligence. To protect against these risks, a renter can and should purchase renters insurance.

What Type of Renters Insurance Should I Get?

Renters insurance is more standardized than many other types of insurance. Most policies cost between $150-$300 and year and cover up to $15,000 to $30,000 in lost goods. You can often opt to extend that coverage for an additional cost.

Like homeowners insurance, many individual item claims are limited to $1,000 each. To protect particularly valuable objects like jewelry or computers, you can purchase “floater” policies for each item.

Does Renters Insurance Cover Anything Other Than Loss?

The primary purpose of renters insurance is to be financially prepared for a loss situation like a fire, theft or structural collapse. Conveniently, renters insurance covers other related loss scenarios as well.

Personal liability, for instance, is usually attached to a renters policy to protect from costs relating to negligence. While your landlord may be responsible for the overall care of your building, events like a slip and fall on the front porch of a rented home could be attributed to the renter’s lack of care. Other instances include a visitor having a burn accident as a result of the renter cooking. These injuries and any related legal costs are covered by most renters insurance policies.

Another item covered by a standard renters insurance policy is living expenses if a covered event renders the housing unit unlivable. For instance, if a tree falls on the roof of a rented home making it temporarily uninhabitable, the landlord is under no financial or legal obligation to pay for living expenses while construction is taking place. A standard renters policy will pay for things like lodging and related transportation costs while the home is being rebuilt or repaired.

Are There Common Exceptions to Renters Insurance Claims?

As always, there are many situations that cannot be covered by renters insurance. The most common examples are certain types of natural disasters like flooding or earthquakes. Special policies can be purchased to cover these events on an individual basis.

A major cause of denied claims stem from situations that actually fall under the landlord’s responsibility. For instance, say a hot water heater rusts then bursts, and your belongings experience water damage. In this scenario, the landlord probably failed to keep up with regular maintenance, and the loss occurred as a direct result. You may be able to file a claim under the landlord’s liability insurance in this instance.

One possible exception to this scenario is if your possessions have been declared a component of a personal business. For example, if you file for a tax deduction on your computer as it is part of your “home office,” this object would likely be considered “company property” and outside the general scope of personal renters insurance. Likewise, a drummer that reports income from band gigs and has the band registered as a business may not be eligible for a claim following the destruction of their drum kit.

How Does My Coverage Work If I Take My Property with Me?

One of the great features of renters insurance is that it can protect belongings even when they are taken outside the home. For example, a student eating lunch in between classes would have their cell phone covered if it was stolen from the restaurant table. Similarly, a student who is studying abroad could have their clothes and jewelry covered if their suitcase gets destroyed by a hotel fire.

Certain exemptions always apply, so read your policy carefully and contact an insurance agent before leaving on a long trip.

What Would Normally Be Covered Under the Landlord’s Insurance?

Say there is a fire that only causes damage to one or two apartments in a building. However, the fire department opens up all the units to make sure that there are no more people or pets left inside. Smoke billows into the apartment and causes damage.

Renters insurance can pay for all the personal belongings to be cleaned in this instance. For example, couches, clothes and bedding can be restored for free of charge minus the deductible. The landlord would have to pay for the walls and counters to be cleaned separately. As one claims adjuster put it in an identical situation: “If you could pick up the apartment and shake it, anything that falls to the floor, that’s what they [would] clean.”

Are There Ways to Save Money on Renters Insurance?

Renters insurance is fairly standardized and can typically be had for a relatively low cost. You can still save money by taking the following steps:

  • Compare ratesComparing renters insurance rates from a variety of carriers is the cardinal rule of insurance shopping.
  • Bundle coverage — Renters insurance can be an almost negligible cost when added to auto insurance or other similar policies. Find out if your current insurance carrier offers renters insurance as an add-on.
  • Raise your deductible — A deductible should be as high as you can afford to pay out of pocket, between $300-$500 for most people.
  • Purchase an umbrella policy — This policy will cost you more, but overall you will generally save money relative to the coverage you get. Lawsuits from personal injury or property losses can soar into the millions as a result of individual negligence. Protecting against these astronomical risks can be an affordable way to dramatically extend your renters insurance coverage.

Do I Need Receipts to Prove a Loss?

Insurance companies have literally millions of products and their values in a database. Often, a video of your belongings you want covered should suffice for a fair approximation. If you want to hold onto every receipt, then do so by all means. Just make sure to keep them in a fireproof safe!

Remember that documenting your personal inventory should ideally be done before a loss occurs. Write a list of your items and your assessed values in advance to streamline the claims process down the road.

Keep in mind that some insurers only cover Actual Cash Value (ACV) instead of replacement costs. The difference is that ACV will deduct payout for the item based on depreciation, whereas replacement value pays for the cost to buy the item or a similar one new.

So, Should I Get Renters Insurance?

Absolutely! With premiums only about $10 a month for coverage of $30,000 worth of belongings and liability, the amount of heartache a policy could potentially prevent makes the cost well worth it.

If you rent and do not have renters insurance, your landlord's policy covers the four walls around you but nothing in between. If some of your possessions were damaged in a disaster, or stolen in a burglary, you would be out of luck without renters insurance.

You may even be surprised at the amount of value your possessions amount to. Even if you have never gotten around to amassing a collection of Ming vases, you probably own at least $15,000 worth of furniture, electronics, musical instruments and sports equipment that will be covered in your car, hotel room, suitcase, purse or backpack. Almost anything you own, anywhere you are would be protected. So even if your home is a veritable fortified compound, you could still benefit from renters coverage.

Renters insurance also protects you from accidents your friends have. Not that your friends would sue you (if they would, you need new friends), but renters insurance gives you some coverage for injuries people receive as your guest. Even though a liability claim is unlikely, you will be extremely glad you have it if you need it. Because of all these benefits, renters insurance is a great product that can offer amazing return on investment.

If you don't have renters insurance or think you're being charged too much, get a quote and compare renters insurance rates to find the best policy at a price that doesn't bust your budget.

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