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Is Renters Insurance Worth It?

Published June 30, 2022
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Yes, you really do need Renters Insurance

If you're a tenant, purchasing a renters insurance policy is definitely worth it. A common misconception among people who forego renters insurance is that they don’t think their belongings are worth enough money to warrant the cost of insurance. But, they are not considering how much peace of mind is worth.

So, think about how much it would cost to replace everything you own, in case an unexpected event caused a total loss. The costs of furnishing a home when starting from scratch can be expensive. Not to mention the cost of replacing personal items such as clothing, jewelry, and electronics. The average renter would need to shell out a minimum of $20,000 to replace all the basic things they own. The insurance cost is nothing compared to that.

Losing your personal belongings can be disastrous to your finances, especially when a great deal of your income goes to pay your rent. According to Pew Research Center, 45% of renters in 2019  “paid rent equal to 30% or more of their gross household income.” If you had to replace all your goods in that scenario, you might be hard-pressed to afford your living expenses.

But there are solutions. Renters insurance, for example, is an affordable way to protect yourself in the event of theft, certain natural disasters, and potential lawsuits. For the cost of getting a pizza delivered each month, you can rest assured that in a worst-case scenario, you’ll be protected against covered events such as property damage, natural disasters, and lawsuits. 

What this article covers:

  • Renters Insurance is defined with an explanation of who benefits from this type of coverage.
  • The typical cost of Renters Insurance and what coverages are included.
  • The four types of coverages typically provided in a renters policy.
  • Types of perils that are covered by a Renters Insurance policy.
  • How much insurance you need as a tenant (renter) and what is not covered.
  • How renters should insure their valuable items such as jewelry, computers, and electronics.

What you should know: 

  • Renters insurance premiums are very affordable and worth the protection. 
  • Damage caused by natural disasters such as earthquakes, floods, and sinkholes is not covered in this type of insurance policy.
  • Taking inventory of your personal belongings is a good idea in case you ever need to make a claim.
  • Your roommates and their personal belongings are not covered by your renters insurance.
  • Generally, renters insurance does not cover pet damage.

What is Renters Insurance?

Renters insurance is insurance for people who rent their homes, condominiums, townhomes, or apartments. It covers the replacement of personal belongings in the event of fire or theft. It can also protect your assets and cover legal expenses if a tenant is sued for damages resulting from an accident that took place in their home. 

Many tenants aren’t aware of the additional protections that renters assurance affords them. Let’s look at some scenarios where a relatively few dollars worth of renters insurance would cover you against potentially pricy losses.

  • Your car is broken into, and your phone and laptop are stolen. Renters insurance, not auto insurance, would pay for replacements.
  • Your friend who doesn’t have insurance slips and falls on your bathroom floor and sues you for their medical expenses. Renters insurance would pay for your legal bills and a potential settlement.
  • A fire in your apartment building causes damage to your unit and you need to move into a hotel while your dwelling is being repaired. Renters insurance would cover the expenses of staying somewhere else.

How much does renters insurance typically cost?

Unlike homeowners or car insurance, renters insurance is very affordable. The average cost of renters insurance is about $200/year, or less than $20/month. You can decrease your annual premium by bundling renters insurance with other policies you may have such as auto and life insurance.

What does Renters Insurance cover?

A typical renters insurance policy usually consists of four types of coverage. 

  • Personal Property covers your personal belongings such as clothing, electronics, furniture, and household items.
  • Liability covers legal bills or judgments in the event you are sued due to an accident or injury that occurs in your home.
  • Loss of Use covers additional living expenses of hotel and food incurred from having to temporarily reside somewhere else.
  • Medical Payments covers medical expenses if a guest is injured in your home and has associated medical bills.

What perils does Renters Insurance cover?

  • Fire and smoke damage
  • Theft from your home or vehicle
  • Falling objects such as a tree crashing through the roof
  • Household explosions caused by burst pipes, boilers, furnaces, etc.
  • Riots and vandalism
  • Lightning and electrical damage
  • Weight of snow, sleet, and ice

What isn’t covered by Renters Insurance?

  • Natural disasters such as floods, earthquakes, and sinkholes
  • Damage from pests such as bed bug infestations
  • Damage caused by your pets
  • Personal injuries
  • Car damage and theft of car
  • Terrorism

Does Renters Insurance cover my roommates?

Renters insurance does not cover roommates. If you live with a roommate, each person should carry their own personal renters insurance policy. 

What if I live in an area prone to natural disasters?

There are add-ons, or endorsements, which can be added to a renters insurance policy for people who live in areas prone to natural disasters such as floods, earthquakes, and sinkholes. These add-ons cover perils that otherwise would not be covered under a standard renters insurance policy. If add-on coverage isn’t available, you may need to purchase a separate flood or earthquake insurance policy to make sure you’re covered. 

How much Renters Insurance do I need?

When trying to determine how much renters insurance you need, the first step is to take an inventory of all your personal belongings. The more costly it would be to replace your items, the more renters insurance you’ll need. Using a home inventory app or a spreadsheet, make a list of everything you own and assign an approximate replacement cost. Liability limits start at $100K and usually max out at $500K.

Also, keep in mind how much savings and assets you possess. If you’re ever sued and found liable, these assets are considered part of your net worth and could be seized to pay for the judgment against you.

Taking stock of your belongings might seem like a difficult undertaking, but it’ll pay off if you ever need to make a renters insurance claim. Take pictures of your belongings to show their condition as this can help an insurance adjustor determine value.

What if I own valuable items such as jewelry or artwork?

Many insurance companies set a cap or limit to how much they’ll pay out for certain items such as jewelry, electronics, artwork, furs, firearms, musical instruments, and baseball or comic book collections.

For example, let’s say you inherited a wedding ring from your grandmother that’s worth $10,000 but a standard policy only pays up to $2,000 for jewelry. You’d want to add a scheduled personal property endorsement to your policy to cover the difference. When adding these endorsements, it’s possible you’ll need to get these items appraised by a professional. 

What steps should I take to file a Renters Insurance claim? 

Understanding upfront how the claims process works will save you time and hassle, even if you never need to file a claim. 

The first step is to immediately notify your landlord. Reporting the incident to your property owner is mandatory in most states and is usually part of a rental agreement. 

You should also notify the police in the event of theft, break-in, burglary, and vandalism. Having a police report will help the claims process run smoother as it shows proof of what happened. Be sure to get the information of any officers you speak with about your incident. 

Document the damage while the incident is fresh in your mind. Write up a list of all damaged or missing items. This is when your list of possessions will come in handy. 

Contact your agent or insurer to begin the claims process. Your insurance company will provide paperwork to fill out and will request documentation. Then your claim will be sent to an adjuster who will assess the damage and decide how much you’ll be reimbursed. 

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