Renters often don’t think that they need insurance. After all, the risk of loss seems far lower compared to homeowners. Renters may feel that a renter’s insurance policy may only protect their belongings and aren’t that concerned or feel their belongings aren’t worth much.
This mindset of “not needing renter’s insurance” is widespread. Nearly 95% of homeowners have homeowners insurance. By contrast, only a little over one-third of renters have renter’s insurance.
But renter’s insurance covers more than just your belongings. A basic renter’s insurance policy is very inexpensive, as low as $7 per month. And when you need it, it will save you a lot more than that.
Let’s look at some everyday situations where you would be glad you have a renter’s insurance policy.
Renter’s Insurance: What Does It Cover?
Renter’s insurance usually covers three basic things: personal property, liability, and additional living expenses. Depending on the limits of your policy, these will do the following:
Personal Property will cover the cost of your belongings if damaged or stolen. You can set a coverage limit that makes sense for your situation. Taking an inventory of your items can help you determine what it would cost to replace them.
The value you set for your personal property can either be based on the actual cash value or the replacement cost. Actual cash value would be the cost of the item at the time of the loss, which typically includes depreciation. Replacement value is usually higher if the retail price of the item has gone up.
Liability will cover repairs if you accidentally damage someone else’s property. It can also cover someone else’s medical bills if they are injured while on your premises.
Additional Living Expenses can cover costs you may incur if you have to live somewhere else while your residence is damaged or uninhabitable.
If you live with a roommate, it is recommended that you each have a separate insurance policy. While some parts of the policy would apply to everyone in the dwelling, such as fire damage, your personal property would be separate from any roommates. You will only want to pay to cover your own belongings.
A big exception to most renter’s insurance coverage is flood damage. Flood insurance is typically separate, whether for a homeowner or a renter. If you live in an area with a high risk of flood, you can talk to an insurance agent about a separate flood policy.
Risks in Not Being Covered
Theft is one of the first things that may come to mind with renter’s insurance. Renters are twice as likely as homeowners to be the victims of theft. Replacing a stolen laptop, for example, would be far more expensive than what you pay in a renter’s insurance premium.
But you should also think about the damage that could occur due to fire or a covered natural disaster. If something were to damage all of your belongings, you would be able to replace what you’ve lost. Your belongings are at risk from other damage such as smoke, windstorms, lightning, or water damage.
Taking that one step further, if a fire or natural disaster forced you out of your home, renter’s insurance could cover the cost of staying in a hotel. You wouldn’t have to worry about the huge expense that you might incur during an already stressful time when you cannot stay in your home.
And while no one thinks of others getting harmed in their homes, it can happen. If a visitor trips over your dog and sprains an ankle, you could be liable for medical expenses. Your renter’s insurance would cover those costs.
Property damage is also covered. If a bathtub overflows and causes damage, your renter’s policy would cover that. It can also cover damage that occurs away from your dwelling, such as your kid breaking someone else’s window with a baseball.
Additional Benefits of Renter’s Insurance
There are some other benefits that renter’s insurance provides that could be costly in the event you need to pay them.
- Legal Costs: If you are sued by someone who is injured on your property, for example, liability can cover legal costs and court awards up to the policy limit
- Dog Bites: Depending on your policy, renter’s insurance can cover coverage if your dog bites someone
- Off-Premise Belongings: Renter’s insurance covers not only the items in your home but also items away from your home, such as luggage at an airport or theft from your car
- Things You Have Borrowed: If you borrow a friend’s laptop and it is stolen from your home, your renter’s insurance would cover that since the item was in your possession
- Damage Caused Elsewhere: If your dog destroys someone else’s couch or your kids break an expensive lamp in a department store, your renter’s insurance may cover the expenses
One important thing to note is that renter’s insurance won’t usually cover damage that someone else does to your property. For example, if someone breaks your window, that person would be the responsible party. If that person doesn’t have insurance, then you would need to work out the cost of repairs.
Finding the Right Renter’s Insurance Policy
You may be wondering, “how much is renter’s insurance?” It is actually very affordable for a policy. You can get a basic renter’s insurance policy and give yourself peace of mind with the coverage you need.
When you look at all of the potential expenses versus the cost, it makes sense to have a renter’s insurance policy. No one plans on damage, injuries, or theft, but these types of things happen, and you want to make sure you are protected.