What is Renters Insurance?
If you like your stuff and don’t want to pay to replace it in case disaster strikes, then you need renters insurance. Renters insurance protects primarily your personal belongings but can also cover medical expenses for you and your guests, additional living costs in case you’re ever displaced, and more.
Yes, as with any insurance policy, you can overpay for coverage that under-delivers. And even if you get a comprehensive policy, there are some things (such as pests or natural disasters) where you won’t be covered at all.
However, when you look at all the benefits included for the price point, renters insurance can become a worthwhile investment — you just need to know how to pick a policy that fits you.
- Renters insurance costs a lot: Not true. Policies are typically around $15 per month, which equals out to around $180 per year. For this price, renters can get about $100,000 in coverage.
- The landlord’s policy is enough: Your landlord probably does have an insurance policy. However, this would only cover the building itself and not anything you own, meaning your landlord is not at all responsible for your losses.
- A roommate already has it, so I’m covered: Your roommate owning renters insurance does not guarantee your things are protected. You have to both be on the policy to be fully covered.
- It’s not worth it if you don’t own a lot: Even if you don’t own a lot, the cost of replacing everything can still be enormous. Plus, renters insurance also covers more than just your typical stuff. It also covers food, medical bills, displacement costs, and more.
- Renters insurance is only for things inside your home: Renters insurance also covers stuff you keep outside, like a bike. Even items inside your car would be protected, although the car itself won’t be.
What is Covered by Renters Insurance
Personal Property Damage
Your property, whether it’s inside your house or not, is covered. A basic renters insurance policy will have a specific list of situations where you are covered. There are typically 16 in total. If one of them is the cause of your property getting destroyed or damaged, then you’ll be taken care of.
- Falling objects
- Fire or lightning
- Ice, snow, or sleet (roof collapses)
- Sudden and accidental damage as the result of short circuiting
- Sudden and accidental tearing, cracking, burning, or bulging
- Sudden and accidental water or steam damage
- Volcanic eruption
- Windstorms or hail
Personal liability kicks in whenever you’re personally responsible for someone else’s injuries or property damage. This coverage can help take care of the other person’s medical and property replacement costs, and it can help you cover legal fees in case you end up getting sued.
Additional Living Expenses
Being displaced due to fire, theft, or other natural disaster is a traumatic experience. Not having an alternative place to go is much worse. A renter’s policy that includes additional living expenses coverage will cover the costs of you living somewhere else (such as at a hotel) while you’re displaced.
If someone is injured specifically on your property and requires medical attention, then you’ll be liable to cover the immediate and future medical costs. A renter’s insurance policy will cover the costs up to the limits described in your policy, which can end up saving you thousands of dollars.
Other Coverage Types
Basic renters’ insurance policies have property, liability, and housing coverage. Sometimes you can add additional coverage benefits to expand these categories. This greatly depends on who your insurance provider is. Those include additional liability, earthquake damage, business property, business liability, and more.
What is Not Covered by Renters Insurance
Before you get a policy, you should be aware that renters insurance does have some coverage gaps.
The biggest comes in the form of natural disasters. Yes, renters insurance covers hail and windstorms and fires, but when it comes to flooding earthquakes or sinkholes, you’ll be out of luck. If you live in an area prone to these conditions, then highly consider getting an additional policy.
Additionally, damage or destruction caused by bed bugs, termites, rodents, and other creatures is not covered, since pest control is thought of as the responsibility of the homeowner/renter, and not the insurance company.
- Additional Liability: Accidents happen. If the thought of you paying for someone else’s medical bills or covering a priceless antique you broke makes you queasy, then look into adding more liability coverage
- Additional property: Acquiring more stuff or finding out that the value of the things you own is higher than you thought are two great reasons to look at adding more property coverage.
- Additional housing coverage: If your home is mildly damaged, you might be displaced for just a day while it’s repaired. But if damage is severe, sometimes you’ll be out of your home for a month. The more housing coverage you have, the better off you are in the event of long-term displacements.
- Business property: If you are renting a property to conduct business on, then you can get additional renters property insurance that covers the stuff at the place you work.
- Business liability: The more people you have at your place of work, the more liability coverage you could need.
- Earthquake damage: Renters insurance does not usually cover earthquake damage. It might cover additional housing costs if you are displaced, but if you want your stuff to be replaced, then you need to get an additional earthquake policy.
- Flood damage: Unlike earthquakes, protecting against floods means getting a separate policy entirely rather than just an addition. Pricing and eligibility are handled by the National Flood Insurance Program (NFIP), but there are other agencies that can help you too.
Shopping for Renters Insurance
While renters insurance is cheap, you can still overpay while being under-covered. If you want to shop smarter, then you’ll pick a policy that truly fits your life.
To do so, the first step is to take an inventory of what you own. Add up the value while also gathering proof of this value in the form of receipts, photos, or other documents (since this helps greatly when filing a claim).
Next, do a brief risk assessment. See if there’s anything about where you live specifically that might require additional coverage. Completing both an inventory and risk assessment will tell you exactly how much coverage you need, ensuring you don’t overpay.
Now you can shop. Be sure to compare quotes from multiple companies all the while looking at what discounts you qualify for. Some discounts are given for doing some simple things, like owning security equipment such as alarms and locks. You can also save a whole bunch by bundling with other policies you already own – like your car insurance. Take advantage of all the opportunities available to you so that you can save big.
Choose between Replacement Cost vs. Actual Cash Value
- Replacement cost is when the insurer pays the amount it would cost today to replace an item, regardless of how much you spent on it. This policy is best for things that increase in value over time. For those things that depreciate, you’ll be short-changed.
- Actual Cash Value is when the insurer pays you the exact amount you spent on an item during a claim. The actual replacement cost is of no concern. This ensures you are fairly compensated for your loss. However, if you bought an item as an investment and it increased in value, then you’ll receive less than the current market price.
What’s the Difference Between Named Perils and All Risk Policies
- A Named Perils policy is when the insurer gives you a specific list of scenarios (or “perils”) for which your policy covers. That means that any situations that fall outside of these won’t be covered. Most basic renter’s insurance policies are Named Perils policies. They’re cheaper and often more than adequate, but there is the risk of unexpected exposure.
- All risk policies are easy to understand. They assume that everything is covered no matter what happens. It’s a comprehensive policy … that comes at a premium price point. You’re paying for complete peace of mind, but at the same time, you could be paying for coverage you don’t need.