Going in on renters insurance with roommates may seem like a good idea, but it’s rarely your best choice. Some companies do not allow non-related roommates to share a policy. And, if things go wrong, a shared policy may cost you more in the long run than the amount you may save by splitting your policy’s costs with roomies. Here’s how renters insurance works in roommate situations.
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Does renters insurance cover roommates?
Renters insurance generally only covers your roommates if they are named on your policy, although coverage sometimes automatically extends to your spouse, children and/or other family members who live with you.
While some companies allow you to add non-related family members to your policy, many have restrictions on who you can add. For example, Lemonade and Toggle only allow you to add a non-relative to your policy if they are your significant other.
Although other companies are more permissive, it’s important to consider the potential risks of adding a roommate to your renters insurance before you do so.
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Why is it risky to add roommates to my renters insurance?
The biggest risk of adding roommates to your renters insurance is that your insurance record may be damaged if your roommate files a claim.
Once anyone on your policy files a claim, the incident is added to your file in the Comprehensive Loss Underwriting Exchange (CLUE), a database insurance companies use to check your insurance history.
A prior claim in your CLUE report typically impacts your future insurance rates for three to five years, sometimes longer. If you have too many claims, your insurance company may decline to renew your coverage at the end of a policy period.
Your roommate may be your bestie. But do you want to risk getting hit with higher insurance rates if their belongings are stolen from their car, they start a kitchen fire while vacationing in an Airbnb or they file a claim for any other reason?
Other risks of adding a roommate to your renters insurance include:
- Higher rates: If your roommate has bad credit or prior insurance claims, the insurance company may consider them riskier than you to insure. This, in turn, could result in a significant rate increase.
- Not enough coverage: If the combined value of the belongings you and your roommate own exceed your policy’s personal property, or contents, limit, you may not have enough coverage for all your possessions.
- Late payments: If your roommate is responsible for paying the insurance bill and forgets to do so, a late payment may appear on your insurance record and/or credit history.
Does each roommate need renters insurance?
Although renters insurance is generally not required by law, many landlords require it for tenants, including any roommates listed on a lease.
When landlords require renters insurance, they are primarily interested in making sure each tenant has enough liability insurance to cover any damage they may cause to the property. Most landlords don’t care whether your liability coverage is in a combined policy or individual policies, although some may include more specific requirements in a rental agreement.
If you’re not listed on a lease or your landlord does not require renters insurance, you and each non-related roommate are typically better off with your own renters insurance, unless you are involved in a committed relationship. Here are the main reasons to consider separate policies:
- Renters insurance is relatively inexpensive, with an average cost of about $18 a month.
- When you get your own renters insurance, you can customize your coverage to meet your specific individual needs, which may be different from those of your roommates.
- Certain renters insurance protections follow you away from home. For example, your belongings are typically covered, albeit on a limited basis, in your car or in a storage unit. Renters liability generally covers injuries or property damage you cause anywhere in the U.S. and Canada, and some companies offer worldwide liability protection.
Renters insurance for college students
The protections in a parent’s home or renters insurance policy typically extend to children living in a dormitory while attending college, often up to age 25. However, college students living off campus typically need their own renters insurance.
How do I add my roommate to my renters insurance?
If you have considered all the risks and still want to add your roommates to your renters insurance, here are key tips for getting the best coverage at the best price.
Shop around: You may have to do some legwork to find a company that allows you to add a non-related roommate to your renters insurance. Since each company uses a different formula to calculate rates, it’s best to compare quotes from multiple insurance companies anytime you shop.
Document the value of all your possessions: The best way to determine how much personal property coverage you need for a shared policy is to create an itemized list showing the value of each person’s possessions, and then add up their combined value.
Create a personal property inventory: You can turn your itemized list into your home inventory by adding key details about each item, including its purchase date, location and price. If you ever need to file a claim, having an updated home inventory handy, along with photos of your items and receipts, can expedite your insurance payment.
Agree on a liability limit: Renters insurance often comes with a default liability limit of $100,000, but this amount is not always enough. Consider a higher liability limit if anyone on your policy has a net worth that exceeds this amount and/or anyone earns a high salary.
Choose a deductible wisely: You’re generally better off choosing the highest deductible everyone on the policy can reasonably afford. Higher deductibles lower your rate, but they also require you to spend more out of your own pocket for property losses before insurance funds kick in.
Understand each other’s responsibilities: Set up a payment schedule that allows each person on the policy to pay their share of premium in a timely manner. It’s also generally best to agree to avoid filing claims for inexpensive losses, because avoiding claims helps you keep your rates low.
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