Renter’s Insurance

To Have or Not to Have: That is the question…

If you’ve ever owned a home, then you already know that homeowner’s insurance is a requirement for your mortgage. But if you’re renting this choice is optional, and opting out of this coverage makes you liable for property damage, loss, as well as any personal injuries sustained on your property. That’s a lot to cover on your own.

Sadly, most renters don’t have a basic insurance policy for their possessions. According to a 2014 Insurance Information Institute (III) survey, 63 percent of respondents said they didn’t have renter’s insurance while 37 percent reported having coverage.

Why are so many renters going uninsured? Perhaps it’s because they have the wrong impression about renter’s insurance.

Myths About Renter’s Insurance

1. “My landlord has insurance that will protect me against any loss.”

Your landlord does have insurance, but this coverage is most likely for structural damage of the building itself, and sometimes for damage caused by tenants. This policy doesn’t protect your personal possessions and, in most cases, it doesn’t cover the cost of damage that you may cause to the building.

Let’s say you had a kitchen fire in your apartment. Without renter’s coverage, you alone are responsible for the cost of repairs to the building, replacing any lost property (your own as well as your neighbor’s), and covering all medical payments from physical injuries that may have resulted from the accident.

2. “Renter’s insurance is too expensive. I have enough bills to pay.”

According to the National Association of Insurance Commissioners (NAIC), the average renter’s insurance policy is between $15 and $30 per month. That’s about $180 to $360 per year. Of course, these prices may vary for each renter, but the total cost of replacing all of your possessions will most likely cost much more than your insurance.

Most insurance providers offer a discount when you bundle your renter’s coverage with, say, an existing car insurance policy. Tim LaCasse, a State Farm agent in Washington D.C., says you can expect to save between five and ten percent by bundling your insurance coverage with the same provider.

3. “I don’t have enough valuables to justify the cost of renter’s insurance.”

You might be surprised by how quickly things add up if you had to replace every item in your apartment or rental home. Your furniture, TV, computer, and other property are not exactly “cheap” investments, especially if you also had to replace your neighbor’s property because you opted out of renter’s insurance.

“Most people only think of the big-ticket items, like electronics, but if you really think about it, it’s so much more than that,” says Keith Rutman, vice president of specialty property lines for Allstate Insurance. “For example, in your kitchen, it’s not only the appliances, but the towels, dishes, utensils, and food, too. We find that the average renter in a two-bedroom apartment has about $30,000 worth of stuff.”

If you’ve decided to waive your right to renter’s insurance based on any of the above statements, then you’re forgoing coverage for the wrong reasons. While there isn’t a law that requires you to have renter’s insurance, it is highly recommended.

Why You Need Renter’s Insurance

Do you have an extra $30,000 just sitting in your bank account to replace the items in your apartment? Chances are you probably don’t. This insurance is not only affordable, but it covers you for a multitude of accident scenarios.

For example, a basic renter’s insurance policy will protect you against damage or loss from:

• Fire (or smoke)
• Lightning
• Vandalism
• Theft
• Explosion
• Windstorm
• Some water damage (excludes flooding)

Renter’s insurance will also cover your living expenses and lodging if you have to temporarily relocate because of damage. Plus, a basic renter’s insurance policy covers your legal expenses if someone sues you for an injury sustained at your rental house or apartment.

Unless your disposable income allows you to cover every item in your home as well as your neighbor’s, you can’t afford to opt out of renter’s insurance.

Purchasing Renter’s Insurance

If you’re in need of a policy, here are a few things to keep in mind:

• Make a home inventory list of everything in your house to determine how much coverage you need—you can always consult with a professional to make sure you’re getting enough coverage
• Take pictures of every room in your apartment or rental home and save all of your receipts for major purchases—make sure you take pictures of “big ticket” items, such as jewelry, musical instruments, and rare art
• Determine whether your needs are suited for a replacement-cost policy (covers the replacement cost of your items) or a cash-value policy (covers the value of your items only, not the cost to replace them)
• Understand your coverage—read your policy manual and make sure you know what disasters are covered