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Why is renters insurance worth it?
Whether you’re renting a house or an apartment, renters insurance has several benefits that make it well worth getting.
Renters insurance protects you from unexpected financial losses
Anyone who’s faced a major disaster that they’ve had to pay for out of pocket will probably tell you that they wish they’d gotten insurance. Of course, ideally you’ll never need to use your policy, but the truth is that you never know until it’s too late.
You could lose your belongings in a sudden electrical fire or a flood from a burst pipe. A thief could raid your apartment while you’re away on vacation, or you could inadvertently injure someone and be held liable for thousands of dollars in medical bills. Renters insurance covers the costs associated with all of these disasters and more.
What renters insurance covers
Renters insurance covers damage or losses resulting from the following insurance perils:
- Fire and smoke
- Gas explosions
- Windstorms and tornadoes
- Hurricanes (except for flooding)
- Lightning strikes
- Falling trees or debris
- Leaks and burst pipes
- Mold caused by another covered peril (such as certain types of water damage)
The full list of what renters insurance covers is much longer. To put the value of this coverage into perspective, let’s say you’re faced with the following situation:
You’re paying $15–$20 per month for a standard renters insurance policy. It offers $30,000 in personal property coverage, which is enough to protect all of your belongings, and up to $10,000 in loss-of-use coverage. A fire in your apartment destroys everything you own.
As long as you didn’t cause the fire intentionally, your insurer will reimburse you for your lost belongings and pay for you to temporarily stay in a hotel. This could save you between $30,000 and $40,000 (the total value of your personal property plus however much you spend on your accommodations until you move back in). $40,000 is equivalent to the cost of 166–222 years of renters insurance.
That’s admittedly an extreme situation — it’s rare for a disaster to destroy all of your possessions in one single event — but it illustrates the level of protection that renters insurance provides for a relatively low price.
Renters insurance comes with liability coverage
In addition to protecting your personal property, renters insurance comes with two types of liability coverage: personal liability insurance and guest medical coverage. Each has different applications.
- Personal liability coverage: Most standard policies come with $100,000 in personal liability coverage, although some companies offer up to $1,000,000. Your insurer will cover your legal bills up to this amount if someone sues you for causing bodily injury or property damage, regardless of whether or not the incident occurred in your home. This coverage usually extends to dog bites and property damage caused by your pets under what’s known as pet liability coverage in renters insurance.
- Guest medical coverage: Guest medical coverage will help pay for your guest’s medical bills if they get injured or sick in your home, even if you weren’t at fault. You can generally choose a coverage limit between $1,000 and $5,000.
Most people don’t have $100,000 to spare on a personal liability lawsuit, so the liability protection that renters insurance offers is a huge asset. It’s also nice for both you and your guests to know that you’ve got them covered if they need medical care if they have an accident in your home.
Renters insurance is very cheap, which may come as a surprise given the extensive coverage it provides. It costs an average of $20 per month (or $180 per year), making it one of the cheapest types of insurance you can get.
How much renters insurance costs varies depending on certain factors, like where you live, how much coverage you need, and whether you have a history of filing other insurance claims.
Four major benefits of renters insurance that make it worth it
In addition to the comprehensive coverage listed above, renters insurance offers several other benefits that you might not be aware of:
1. Renters insurance protects your belongings away from home
Many people don’t realize that the personal property coverage in your renters insurance policy applies to your belongings no matter where they are. This means your provider will reimburse you for items that are damaged in or stolen from the following places:
- Your car
- A storage unit
- A hotel room
- A plane, bus, or train
It’s worth noting that some renters insurance policies come with an off-premises sub-limit, meaning that only a certain percentage of your personal property coverage can be applied to your belongings when they’re outside your home. They may also only be protected from certain perils, like theft. You should review the terms of your policy to see what restrictions apply.
2. Renters insurance covers things that you rent or borrow
Another perk of renters insurance is that it sometimes covers things that aren’t even yours, as long as they’re in your possession when they’re damaged or stolen.
For example, if you borrow your friend’s bike and it gets stolen while you’re out for a ride, your policy will help pay to replace it. Similarly, if you rent a violin and it gets destroyed in a fire, your insurer might help cover the costs.
3. Your additional living expenses cover more than just your hotel
If you need to temporarily leave your apartment, your renters insurance won’t just cover your hotel bill. It will cover most of the expenses that you wouldn’t normally have had, including any extra money you spend on the following things:
- Hiring a moving van
- A storage unit
- Laundry services
Remember that your insurer will only reimburse you for the money you wouldn’t normally have spent. This means that if you usually pay $100 per week on food and now you spend $400 per week because you have to eat out at restaurants for every meal, your insurer will pay the difference ($300), but you’ll still need to pay the $100 you would’ve spent otherwise.
Your insurer also won’t necessarily pay the full amount if you make a point of indulging in luxury items you don’t need. You’ll need to show receipts for all of your purchases when you file a renters insurance claim to get reimbursement, and if any expenses seem unreasonable, your insurer may ask you about them.
4. It’s easy to modify, cancel, or transfer your renters insurance policy
Most insurers allow you to review and update your coverage at any time. If you get engaged and want to add a jewelry rider to your renters insurance to make sure that your engagement ring is covered, you can easily do so by speaking to your insurance agent or a service representative. Some companies even allow you to update your coverage online or through their mobile app.
What’s more, if you decide to move, you can easily transfer your renters insurance policy as long as your company offers coverage in your new location. All you need to do is update your address. Your renters insurance even covers your property when you move.
Why is renters insurance important for both landlords and tenants?
Landlords often require tenants to get renters insurance before they move in. Landlords like it when their tenants have renters insurance for several reasons:
- To avoid disputes with tenants (e.g. if your possessions are stolen and you try to hold your landlord accountable)
- To reduce potential liability in a legal claim
- To avoid having to pay for your relocation if a peril forces you to evacuate
Do I really need renters insurance if my landlord already has insurance?
Yes, you need renters insurance even if your landlord has insurance because your personal property and liability aren’t covered by your landlord’s insurance.
Many people mistakenly think that they’re covered under their landlord’s policy, but landlord insurance covers the structure of the building and your landlord’s own personal liability. It doesn’t cover you or your things.
Getting renters insurance is the only way to ensure that you won’t need to pay out of pocket to repair or replace your personal belongings if something happens to them.
How to make the most of your renters insurance
To make sure that you’re getting the right policy, there are a few things you should bear in mind when you’re buying renters insurance.
Shop around for the best deal
Before choosing an insurance company, always compare quotes from several carriers and choose the one that offers the lowest price for the coverage you need. This is easy to do by visiting each insurance company’s website and filling out their quote form, but you can also speak to an agent directly. Don’t feel like you need to sign up the same day — there’s no harm in taking time to consider your options.
You should also check the customer reviews of each insurer to get an idea of how they handle insurance claims. You want to make sure you choose a company that is reputable and has a good track record.
Pick the right amount of coverage
Choosing the right amount of coverage is one of the most important things to consider when you buy renters insurance. To ensure that you’re getting enough personal property coverage to protect all your possessions, create a home inventory of all your belongings (or just the most valuable ones, if you’re pressed for time).
Also think about whether you want extra personal or medical liability coverage, which is often a good idea if you have pets or children. Don’t worry if you change your mind later about how much coverage you want. As we mentioned earlier, renters insurance is flexible, so you can adjust your coverage at any time.
Explore discount opportunities
When shopping around for a policy, check out what renters insurance discounts you’re eligible for. Many companies offer similar discounts, but some offer deals that are targeted toward a specific group, such as military veterans or alumni of a local college.
Apart from discounts, there are also other things you can do to get a lower renters insurance premium. Common ways you can save include:
- Choose a higher deductible: Your renters insurance deductible is the amount you have to pay out of pocket when you file a claim before your insurer will cover the rest of your expenses. Choosing a higher deductible will get you a lower premium, which means you’ll save money on your monthly payments, though you should take into account that it will limit the compensation you’re eligible for when you file claims.
- Bundle your insurance policies: Many insurance companies offer a discount if you combine two or more insurance policies, such as auto and renters insurance. This is known as a bundling discount.
- Install safety features: If you have smoke detectors or a burglar alarm system installed in your home, you’ll be eligible for a discount on your renters insurance with most companies.
- Pay in full: Some insurers offer a discount for paying for a full year’s premiums upfront instead of paying on a monthly basis. If you have the money on hand, it’s worth paying in full to save in the long term.
When is it not worth it to get renters insurance?
The only time when getting renters insurance isn’t worth it is if you’re already covered under someone else’s policy. Most renters insurance policies automatically cover spouses and immediate relatives, so you probably don’t need renters insurance if you’re married and your spouse already has a policy.
Similarly, you don’t need renters insurance if you live with your parents and they already have renters or homeowners insurance. Even if you don’t live with them full-time, you might still qualify for coverage under their policy if you’re a full-time student, though limitations sometimes apply. If you’re unsure whether your parents’ policy covers you, then check the terms and conditions of their renters insurance policy.
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