When you rent your home, you take on a bit of risk. Everything that your landlord might have neglected, from plumbing to electricity, could subject your personal belongings to irreparable damage. Because you don’t own your home, you can’t buy homeowner’s insurance. Renter’s insurance will cover all your possessions just like homeowner’s insurance, the only difference is that it doesn’t insure the building structure – that’s up to your landlord.
Table of Contents
- What is renter’s insurance?
- What does renter’s insurance cover?
- How much does renter’s insurance cost?
- Should I get renter’s insurance?
- Renter’s insurance: What to look out for
- Final thoughts
What is renter’s insurance?
In brief, renter’s insurance is a type of insurance policy that covers renters in the case of damage or loss to their personal belongings. Of course, this doesn’t mean that it covers belongings such as your car. Rather, it insures personal items from houseware to electronics. This also differs from home insurance, which you can purchase if you own your home.
What does renter’s insurance cover?
Renter’s insurance covers a lot more than you think. For instance, renter’s insurance will cover any liability up to $100,000. That means that when an accident occurs, you are covered in the case of injury to another person. Moreover, it will even cover your belongings if they are stolen not just from your home but also your car or your person while you’re out. The insurance policy will cover essential belongings such as clothing, household items, electronics, small appliances, furniture, and more.
In the event that the property you’re renting gets damaged, renter’s insurance will also cover additional living expenses as you live at another location temporarily. This is helpful after natural disasters and devastating accidents.
Of course, there are far more types of damage that renter’s insurance will cover. Surprisingly, renter’s insurance will cover many different types of emergencies and accidents, here is an assortment of the types of damage covered.
Human Damage
- Theft
- Vandalism or malicious mischief
- Riot or civil commotion
- Falling objects
Renter’s insurance covers you in the case of theft, not only from your own home but also from other locations like a vehicle.
Disaster Damage
- Smoke
- Fire
- Lightning
- Flooding
- Volcanic eruption
- The weight of ice, snow, or sleet
- Windstorms
- Hailstorms
Many Americans live in an area that’s prone to natural disasters, and everyone is at risk of fire or smoke damage. This coverage is a no-brainer for everyone.
Mechanical Damage
- Damage caused by aircraft
- Damage caused by vehicles
- Explosion
- Damage from water or steam from sources including household appliances, plumbing, heating, air conditioning, or fire-protective sprinkler systems
While some might find it unlikely that their possessions inside their home could be damaged by a vehicle, what you should realize is that this insurance still covers you for this damage to your belongings when you’re outside your home.
To help you understand how renter’s insurance works, imagine a burglar breaking into the apartment that you rent. To invade your apartment, the burglar damages the front door and then steals your TV. You won’t be responsible for fixing the door, which is part of the structure and therefore covered by landlord insurance. However, your renter’s insurance should either replace your TV or at least reimburse you for its value.
How much does renter’s insurance cost?
The consensus appears to be that renter’s insurance costs around $180 per year. Meanwhile, the National Association of Insurance Commissioners cites that renter’s insurance costs around $120 to $258 per year in the United States. This variance occurs state by state. Unfortunately, renters in the Southern US and the Midwest pay a higher premium because of their susceptibility to natural disasters such as hurricanes and tornados.
Evidently, renter’s insurance is not particularly expensive. Paying roughly $200 a year doesn’t sound like much compared to the risk of paying to replace all your belongings out of pocket.
Should I get renter’s insurance?
Your decision to purchase renter’s insurance will depend on the extent of coverage that you need. Before you begin, you should take account of all your possessions, as they are usually covered up to $100,000. Is the roughly $200 cost worth covering tens of thousands of dollars worth of damage? Probably, especially when you consider your landlord might have access to information about the property that you don’t. What types of risks are hidden? Of course, it’s also possible that your landlord wants to be up-front and requires you to hold landlord insurance anyways.
Aside from protecting your personal property, renter’s insurance will cover potential lawsuits arising from an accident on the property. This will give you peace of mind as your landlord likely already holds an insurance policy on your unit or building. If you live in an area that’s prone to natural disasters and the like, renter’s insurance will also be extra helpful, though it will cost more.
In some cases, renter’s insurance covers thefts that didn’t necessarily occur at your home. This means that if something valuable is stolen from your car, like a laptop, you may still be entitled to compensation for the laptop’s value. If you rent, your financial position might be quite vulnerable. So having this type of extra coverage can be extremely valuable in preparing you for the worst incidents.
Renter’s insurance: What to look out for
Before you purchase a renter’s insurance policy, it’s important to be aware of these details that could save you time or money down the road.
1. Cash value vs. replacement value
Look at the fine print, does your renter’s insurance cover the cash value of damaged or stolen goods? Or will it automatically replace such goods for you? As a policyholder, you should prefer the latter. Many insurers will account for depreciation when they offer to compensate you with the cash value of your goods. That means they might compensate you with enough money for a five-year-old laptop rather than a new one.
2. Bundle insurance plans
Some insurance companies will combine auto insurance or other plans with your renter’s insurance. This will help you save money and even time. In the long run, it will be far more convenient for you to continuously deal with the same insurance company.
3. Rental insurance requirements
To shield themselves from any possible liabilities, landlords sometimes require that their tenants purchase renter’s insurance – it’s permitted in most states. Purchasing renter’s insurance might even help you appear more responsible to a prospective landlord if you have a plan already.
Final thoughts
While renter’s insurance is cheap, it still helps you mitigate a huge number of risks. In the case of accidents or emergencies, the last thing you want to do is spend all your time trying to find money to replace your clothing, houseware, and electronics. At an average price of $180 per year, it’s a small price to pay for peace of mind when you’re dealing with the potential unknowns that you are exposed to at your rental location.