“Do I need renters insurance?” is a popular question many people ask before moving into an apartment. But even though renters insurance is one of the most affordable types of insurance – costing, on average, less than $200 a year – less than half of American renters actually have it. But putting off renters insurance could actually mean putting off your hopes of one day purchasing the home of your dreams. In this blog, we’ll explore the importance of having renters insurance, how it works, and what it covers.
What Is a Renters Insurance Policy?
Put simply, it’s a type of policy that covers losses to personal belongings and provides personal liability renters insurance. In other words, renters insurance can cover everything from smoke damage to petty crimes and ensures you’re protected if injuries occur in your rental that aren’t due to a structural problem. (That type of issue falls under your landlord’s insurance.)
Renters insurance provides protection for your possessions in a wide range of housing options – anything from a studio apartment to an entire house or mobile home. Even if you’re just starting out and don’t have a lot of possessions, getting renters insurance – which is probably the easiest and most affordable type of insurance you’ll ever purchase – is a wise move. The National Association of Insurance Commissioners (NAIC) and the Insurance Information Institute place the average cost of renters insurance at about $15 per month.
How Does Renters Insurance Work?
Renters insurance functions like any other type of insurance in that it protects you from the unexpected. A standard policy helps replace your personal belongings while also assisting you with temporary living expenses if your apartment or house is damaged by a covered loss. And like other forms of insurance, you’ll often receive a discount if you pay upfront for a year.
What Does Apartment Rental Insurance Cover?
Renters insurance will typically cover the following perils:
- Fire or lightning
- Damaged caused by wind
- Smoke damage
- Accidental discharge of water
- Other common loss types
When choosing a renters insurance plan, remember to pick one that includes liability protection, as this protects you from injury or property damage that happens on or away from your rental. With liability protection, your policy will include legal defense fees if you were sued over an accidental injury or property covered by the policy. Many landlords will require tenants to purchase renters insurance with specific liability limits, especially if they own pets.
Do I Need Renters Insurance?
What happens if you don’t have renters insurance? Nothing good. Think about it: if everything you own was lost today, would you have the finances to replace it? For most renters, the answer is no. Renters insurance removes this financial burden from your shoulders, allowing you to live free from the fear of what-if.
Paying out of pocket for your belongings isn’t the only reason you need renters insurance. Below are four primary reasons why it’s important to make sure you’re covered before moving into your new space.
1. Your Landlord’s Insurance Doesn’t Cover You
Landlord insurance only covers the structure of the building and not your personal belongings. For instance, your landlord’s insurance may suffice when a fire damages the entire building, but it can’t help you if your TV is stolen or your couch is damaged by a fire starting in your living room.
A landlord’s policy is also unlikely to help if you accidentally damage a neighboring apartment. Perhaps your shower is leaking and caused water damage to the apartment below you. Your landlord’s insurance won’t cover this, but personal renters insurance probably will.
2. You May Own A Lot of Possessions
Take a moment to add up the value of all of your possessions. Just your computer and your phone alone will likely add up to a couple thousand dollars. In fact, the average person has thousands of personal belongings – all of which aren’t covered under your landlord’s policy.
3. It’s There for You in the Case of Disaster
Many renters insurance policies provide a “loss of use” benefit. Loss of use coverage or “additional living expense” as it’s sometimes called, can cover hotel costs, restaurant meals, or other expenses accrued when living away from your home.
4. It Helps Keep Your Finances in Order
Most renters one day hope to own a house of their own. One of the most important benefits of renters insurance is that it helps keep your finances intact if disaster strikes. Knowing you don’t have to dip into your house savings or, even worse, your retirement fund just to purchase all new living necessities is priceless.
How Much Renters Insurance Do I Need?
Renters insurance premiums are dependent upon the deductibles you’re willing to pay. Lower deductibles mean higher premiums and higher deductibles mean lower premiums.
It’s important to note that an insurer will not reimburse you for any losses that are lower than your deductible. For instance, if your deductible is $1,000 and you suffer $500 in losses, then you are responsible for covering those costs, even if those costs are a result of damages that fall within your policy. With that in mind, the average renters policy – which costs about $15 a month – covers up to $30,000 in personal property coverage. That’s excellent coverage for the price of a few coffees.
Higher Deductible or Higher Premium?
When choosing a deductible, you’ll want to consider the out-of-pocket costs you’re willing and able to pay. Are you a disciplined saver comfortable enough to offset a high deductible with money in the bank? Or are you at a place where balancing the higher deductible against the risk of greater out-of-pocket expenses is of more benefit to you? The answer is dependent upon your personal circumstances and finances, and neither one is necessarily better than the other.
Yearly or Monthly Premium?
Can you get renters insurance for 3 months? What about upfront for a year? Yes. Most policies can be paid either annually, quarterly, or monthly. While renters insurance is affordable no matter your preferred payment method, you’ll typically receive a discount by purchasing your renters insurance upfront for an annual plan.
Is Renters Insurance Worth It?
Given just how affordable renters insurance is, even the stingiest financial advisor would certainly answer the question of “do I need renters insurance?” with a resounding yes. For the cost of an annual entertainment subscription, you can ensure your belongings and other fees are covered if the unexpected occurs. The peace of mind it brings is priceless too.
Renters insurance often provides substantial discounts for measures you take to reduce the risk to the insurer. These can include fire or burglar alarm systems, fire extinguishers, sprinkler systems, and even deadbolt locks on outside doors. As mentioned above, you might also get an additional break if you are already a policyholder with a particular company.
What Do You Need to Get Renters Insurance?
Can you get renters insurance online? Yes. Getting a quote online for renters insurance has never been easier, but you can also get a quote over the phone or in person. Before doing so, it can be helpful to calculate a rough estimate of the cost of your personal belongings, as this will help you understand the amount of coverage that is best for you.