What is Renters Insurance?
Renters insurance is a type of policy that is designed to cover the tenants and their personal belongings in a rented residence. While landlords have their own homeowners insurance policies that cover their structures and financial interests, these policies don’t generally extend coverage to their tenant's personal property.
This means that if a tenant’s property is damaged or stolen, a landlord's insurance is not likely to cover the cost of replacing those items.
Most renters don’t think about protecting their belongings, much less their potential liabilities as a tenant. In many cases, tenants will look to their landlord for compensation for damaged, destroyed, or stolen items.
If the landlord is responsible for losses due to negligence, the tenant may have a case but this is the exception, not the rule. In most cases, the responsibility for their belongings, and liability claims falls to the tenant.
This is why many landlords require tenants to have renters insurance sometimes referred to as apartment insurance, or tenants insurance before occupying a property. They do this to avoid disagreements that may arise as a result of theft, injury, or damage.
A renter's policy should contain liability insurance which helps protect the landlord in case the renters or guests get injured on the property.
How Does Renters Insurance Work?
Renters insurance works just like most insurance policies. The policy holder chooses the level of personal property coverage, and how much liability coverage they require, these levels will determine how much renters insurance will cost.
In the event the policy holder suffers a loss from a covered event to the tenant or their belongings, such as fire, theft, or other types of damage, the tenant simply files a claim with the insurance company.
The insurance provider will then pay the amount that’s equivalent to what’s covered by the policy after paying any deductible. A replacement cost coverage policy is a good idea as well, this means you won't have a deductible, and you will be paid the current value of your losses.
Apart from covering your property, renters insurance covers other types of disasters.
For example, let’s say someone falls on your stairs and sues you for the medical bills, renters insurance can cover it. If you have to move out of your house after a fire tragedy, most policies will take care of the cost of living in a hotel room as well.
However, it’s important to go through your renter's policy and coverage and identify its strengths and weaknesses. The elements covered by policies differ, and may be less detailed if you choose a lower premium.
What Does Renters Insurance Cover?
Renters insurance primarily covers tenant's belongings in the event of damage or destruction. But keep in mind that the policy doesn’t cover for every type of damage or accident. Renters insurance typically deals with four types of covered losses. These are;
- Personal Property Damage or Loss: In the event that your personal items get damaged in an event named in your policy, your renters insurance policy will cover the cost of those damages equivalent to your policy’s limits. Examples of covered perils include fires, theft, or wind.
- Personal Liability Coverage: In case a visitor gets injured while on your premises or their property is damaged, and you are responsible for the damages, renters insurance can cover all the liability costs. This includes legal fees associated with the cost of hiring your lawyer, for as long as it doesn’t exceed the maximum liability coverage.
- Additional Living Expenses: If a covered aspect makes your rental home or apartment uninhabitable, your renters insurance policy will cover all the expenses incurred after interrupting your normal living expenses. This includes things like hotel bills, and restaurant meals.
- Medical Expenses: Renters insurance also offers limited coverage for any medical costs related to bodily injury of a guest on your property. Medical payments coverage can save both the landlord and the tenant in the event some gets injured on the property.
These are the basic types of coverage that renters insurance provides to tenants. Some Renters insurance policies may even cover your belongings when you’re traveling, this may require additional coverage which is a good idea.
As much as this insurance policy protects you against unexpected events, it’s still important to realize the type of scenarios that are not covered by this type of insurance.
What’s not covered by Renters Insurance?
Renters insurance coverage won’t protect you from everything. Most service providers are consistent about the types of claims they don’t cover. Damages caused by natural calamities are not generally covered. Here are some things that aren’t covered
- Property Damage- Most of the renters insurance companies will not cover damages caused to the property itself. The landlord's policy generally takes care of the property itself.
- Damage caused by Pests- Most renters insurance policies don’t cover damage costs caused by bed bugs, ants, and rodents. These are classified as a maintenance issue and failure to provide ongoing maintenance doesn't meet the standard for coverage. It's important to note that most residential leases leave the tenant responsible for pest remediation. The exception to this is in the event the pests at the property prior to moving in.
- Flood and Earthquake Damages- Earthquake and flood damages are also not covered by a renters policy, especially in areas prone to these natural disasters. Nevertheless, some companies offer coverage of these disasters at premium rates.
- Car Damages or Theft- If you have a car, its theft or damage won’t be covered by your renters policy. You’ll need a seperate policy for auto insurance that offers comprehensive coverage. However, renters insurance will cover the belongings that were inside your car when it was stolen.
- Roommates- A renters insurance policy doesn’t cover damages to your roommate’s personal possessions. If you want them covered, you should include the items in your insurance policy.
Liability For Pets
Liability from pets is a major issue for many landlords. The good news for renters is that renter’s insurance usually covers liability from dog bites, and associated legal expenses. There are liability limits, generally, these fall into the $100,000 to $300,000 range so if the claim exceeds these limits, the dog owner is responsible for the difference.
How Much Does It Cost?
Fortunately, a typical renters insurance policy isn’t that expensive, these policies can cost you as little as $10 to $20 a month and about $200 to $250 per year. This is a fraction of the replacement cost for the average renter's belongings. It just makes sense to obtain this type of insurance even if it's not required.
The price of your policy is determined by the type of policy, and how much coverage you need. Individuals who own expensive and sophisticated gadgets or an art collection will pay more than those who’ve simple and less expensive items.
Do You Need Renters Insurance?
It’s all up to you to decide whether you need renters insurance or not. If you’re finding it hard to make this decision, start by evaluating your personal finances and your possessions. If you live in a small studio apartment with simple furnishings, and you’re sure that you can replace them from your pocket without any struggles, you may not want renters insurance.
On the flip side, if you own more household items that you can’t afford to replace at once, a renters policy will benefit you.
Start by doing a home inventory and make a list of the items in your home and how much they will cost to replace.
Don’t forget to include the smaller items, i.e., dishes, books, musical instruments, fine jewelry, clothes, even pots, and pans. Now, sum up the total and if the total amount exceeds the amount you can afford to replace your inventory, you should consider getting a quote for a renters insurance policy.
How Can I Get Renters Insurance?
Obtaining a renters insurance policy is very easy; in fact, you’ll wonder why you haven’t already done it. After you’ve taken stock of all your belongings, find out what’s covered by your landlord’s insurance and note down everything that isn’t covered.
You can then start researching different insurance companies online and make comparisons before choosing. Most insurance companies offer free quotes online, over the phone, or even in person. You can contact an insurance agent and they’ll take you through how much coverage you need for your situation.
Other Considerations When Purchasing Renters Insurance
Once you’ve decided that you need renters insurance, there are several things to consider before purchasing this type of insurance policy. They include:
- Price and Coverage: Insurance companies will give you a fixed amount for all your belongings, and not on separate items. The higher the amount, the more you’ll pay for your insurance. It's important to note that policy limits, and coverage limits do apply, so make sure you have the right amount of coverage.
- Deductible: It’s also good to consider how much you’ll be required to pay before your insurance kicks in. Remember, a lower premium means a higher deductible and vice-versa.
- Replacement Cost vs. Actual Cash Value: A policy will either pay you for the replacement of a similar item or pay you with ACV. ACV represents the value of the property when it was damaged. Although replacement premiums cost more, they’re worth every penny.
- Previous Claims in your Location: If you live in an area that sees a lot of claims, you’ll probably pay more for your renters insurance. If you or your neighbors have had lots of claims, this may also impact the price of your policy.
Even if you feel that your personal property isn’t worth an insurance policy, simply having liability protection is worth the cost.
Most importantly, ensure that you’re not paying for the coverage you don’t need. See what’s covered by your landlord’s insurance policy and make a comparison with what you need before proceeding to purchase a renters insurance policy.
If you need more information about renters insurance, you can contact renters insurance experts to get estimates or contact us and we can point you in the right direction.