Many folks prefer to rent instead of own property, as there’s less responsibility and expense when the unexpected happens. If you happen to be among the 36% of U.S. residents who rent (according to the National Multifamily Housing Council), one of your greatest safeguards is to own renters insurance.
In the event that a flood, fire, or other natural disaster destroys not only your rental but also your personal property, renters insurance can help you get back on your feet. However, despite its obvious advantages, many people delay getting coverage because they don’t understand how renters insurance works and what they may be liable for as tenants.
What Is Renters Insurance?
Renters insurance covers the renter’s belongings in the event of loss, theft, fire, or other damage. Renters can choose the level of coverage that best protects the value of their property. Many policies do not cover damage caused by floods or earthquakes, but it is possible to purchase a separate policy to cover these events. If your rental property becomes uninhabitable for a period of time, your policy may pay for you to temporarily stay elsewhere, such as at a hotel.
The specific items covered may be listed in a policy’s text, or it may be left up to the renter to take photos or provide other proof of owned items (check your policy to confirm exactly what’s required). Some renters insurance policies also include personal liability coverage, which protects renters in the event that someone is injured or someone else’s property is damaged while in the rented unit. Another perk is that a policy may even cover items that are lost or stolen while traveling.
Pro tip: If you need a renter’s insurance policy we’ve partnered with Policygenius. They are going to help you calculate exactly how much coverage you need and then show you policies that are the best match at the best price.
Myths About Renters Insurance
When people opt out of renters insurance, it’s often because of certain preconceived notions they have. Here are the several myths that need to be dispelled.
1. Landlord’s Insurance Covers Your Personal Property
Renters often hear their landlords say that the building is insured and assume that coverage applies to their possessions. Unfortunately, that’s simply not the case. The owner’s policies generally cover only the building itself – not the items inside the house or apartment. Therefore, while a landlord may have insurance for the property, it doesn’t give you any assistance if your belongings are lost, stolen, or damaged. In fact, many landlords require their tenants to have renters insurance.
Remember, as a renter you have no control over what other tenants do in their units. In a worst case scenario, you could find yourself bearing the brunt of damage caused by someone else.
2. It’s Too Expensive
Some apartment dwellers balk at obtaining renters insurance because they assume it costs as much as homeowners insurance, which can be pretty pricey. Although it varies from state to state, the average premium for homeowners is $1,034 per year, according to the Insurance Information Institute. Fortunately, renters insurance is usually much more affordable, averaging just $187 per year. According to data from the National Association of Insurance Commissioners, the average per-month rate for renters insurance ranges from $15 to $30, depending on your level of coverage.
3. One Occupant’s Coverage Extends to Everyone
In some instances, if your roommate has renters insurance, your possessions may be covered as well. However, that’s not the norm.
In most cases, insurance only covers people whose names appear on the policy, according to Esurance. However, having a dedicated policy ensures not only that each renter’s possessions are protected, but also that each person has liability coverage. You and your roommates could get a joint renters’ policy – just make sure everyone’s name is listed and, if necessary, that everyone’s possessions are documented.
4. The Weather Isn’t Severe Enough to Need Coverage
When people think of renters insurance claims, images of earthquakes and tornadoes often come to mind. However, catastrophic weather events aren’t the only things you need to worry about when it comes to property damage. While you may live in an area where those types of weather events aren’t likely to occur, many insurance packages provide coverage for more common events such as vandalism, fire, water damage, and burglaries. It’s also important to note that some weather events – such as flooding and earthquakes – usually require separate dedicated policies.
5. Your Possessions Aren’t Valuable Enough for Insurance
You may not own a grand piano or a huge surround-sound entertainment system, but chances are you still have enough valuables to warrant insurance. People commonly overlook expensive things they use regularly, such as laptop computers, jewelry, and televisions. Additionally, the total value of seemingly inexpensive items, such as clothes and kitchenware, can quickly add up. Instead of focusing on the individual value of items, consider the total replacement cost if everything is lost.
6. You Can’t Get Coverage If You Live By the Water
Although it’s true that some companies won’t insure tenants who live in coastal areas (according to Brick Underground) because of the potential for wind damage or floods, the best course of action is to research which insurance companies serve your area and call to find out what your options are. Chances are, some possibilities exist.
What Kind of Renters Insurance Do You Need?
There are two main types of renters insurance: replacement cost value (RCV) and actual cash value (ACV). With an RCV policy, you can replace a lost, stolen, or damaged item with a comparable item at the current market value. For example, if you have this type of coverage and your laptop is stolen, you get a brand-new computer.
If you have ACV insurance, the covered amount reflects depreciation as a result of age and wear-and-tear. In this case, if your stolen laptop was a year old, an ACV policy would only reimburse you for the amount the laptop is thought to be worth at the time you made the insurance claim. This means you would receive enough to purchase a similarly aged and used laptop instead of a brand-new one.
Learn more by reading our post on how much renters insurance you need.
Before purchasing a renters insurance policy, be sure to communicate with your provider to ask any questions you may have, and clarify the types and costs of coverage. Your insurance company representative can help you make the best choice for your situation. Being informed about your premium cost and coverage level could help you feel more comfortable about settling on a plan and choosing the specifics, such as the deductible amount.
Have you heard any other myths about renters insurance?