If you’re a renter, you may be among the majority of Americans who don’t carry renters insurance. A 2016 poll conducted by the Insurance Information Institute found that while 95 percent of homeowners carry homeowners insurance, only 41 percent of renters carry renters insurance. Some renters may believe that their landlord’s homeowners insurance covers their personal belongings and certain liabilities, but that’s not necessarily the case. Your landlord’s insurance covers losses to the building itself, not your personal property. It covers some but not all liabilities, which may leave you exposed in case an accident happens on your rented property (more on that below).
Some renters believe that they simply don’t have enough personal property to justify a renters insurance policy, but if you were to itemize all your belongings, you may be surprised at how quickly it adds up and how expensive it would be to replace those items in case of a loss.
If you’re a renter who hasn’t considered or doesn’t believe renters insurance is necessary, below are 6 reasons why you might want to reconsider.
1) It’s Affordable
According to the Insurance Information Institute, the average annual premium for renters insurance in 2014 was $190 versus $1,132 for homeowners insurance. Rates will vary by location, the amount of coverage you choose, and your deductible. For $15 - $25 a month, you should be able to find adequate coverage. Residents in Mississippi, on average, paid the most at $256 per year in 2014 versus Idaho, who paid the least, at $156 per year in 2014.
2) Covers Personal Property
As mentioned above, even if you think you don’t have a lot of valuable possessions, would you be able replace all of your bare necessities in case of a loss? Would you be able to replace your entire wardrobe in case of a fire and/or smoke damage? Laptop? Furniture? Jewelry? The point is, you may own a lot more than you realize, and for a relatively inexpensive policy, your possessions are covered. In fact, the standard HO-4 policy for renters covers losses from perils including:
Damage caused by an aircraft
Damage caused by a vehicle
Fire or lightning
Riot or civil commotion
Vandalism or malicious mischief
Weight of ice, snow, or sleet
Windstorm or hail
Damage from water or steam from sources including household appliances, plumbing, heating, air conditioning or fire-protective sprinkler systems
Losses from floods and earthquakes are not covered in standard policies, and damage from windstorms may require additional coverage in areas prone to hurricanes. You’ll want to check with your carrier to determine if you’ll need an additional rider to cover those type of losses. Additionally, renters insurance typically won’t cover losses that arise out of your neglect or intentional acts, such as a lit cigarette causing a fire.
3) Liability Coverage
Liability coverage is also included in a standard renters insurance policy. This provides coverage if someone were to be injured in your home, as well as paying any court judgments and legal expenses, up to the policy limits. You’ll also have medical-payments coverage, which is designed to pay for medical expenses to others who are accidentally injured on the property, regardless of negligence.
Most policies begin at $100,000 of liability coverage and between $1,000 - $5,000 in medical payments, but you can purchase higher coverage limits. You can also consider an umbrella policy which provides an additional $1 million dollars in coverage for about $150 - $300 per year.
4) Your belongings are covered while you travel
Renter’s insurance covers your personal belongings whether they’re in your home, car, or with you while traveling. Your possessions are covered from loss due to theft and may be covered for other losses, such as the above-named perils. You’ll want to double-check your policy and with your agent as to what losses may be included/excluded while traveling.
Renters insurance also helps to fill coverage gaps. For example, if you leave your laptop or a musical instrument in your car and someone breaks into your car and steals it, the damage to your car would fall under your auto insurance and your renters insurance would cover your belongings.
5) Living Expenses
If a loss makes your home uninhabitable due to one of the covered perils and you’re displaced, your renters insurance policy may cover living expenses such as hotel costs and food. You’ll want to review your policy to find out how long this coverage will last and how much spending will be capped.
6) Your Landlord might require it
Some landlords (or their homeowners insurance carrier) may require for their tenants to have their own renters insurance. The reasoning behind this is that it will help alleviate some of the landlord’s responsibility in the event of a loss.
When purchasing a renters insurance policy, inventory all of your possessions, including any serial numbers, receipts, and appraisals, if applicable. Take photographs. This will not only help to determine the overall value of your possessions when selecting your coverage limits, but will also be useful in the event of a claim.
You’ll also want to think about Replacement Cost (RCV) versus Actual Cash Value (ACV). The RCV replaces your possessions with similar items at their current market value and does not factor in depreciation. Premiums for RCV policies are typically 10 percent more than ACV policies, which will reimburse you for lost or damaged possessions after taking into account the age and wear & tear of the item.
Additional ways to save money on your renters insurance includes bundling with other insurance products, as well as raising the amount of your deductible. For example, you may raise your deductible from $500 to $1000 to reduce premium payments, but be sure you can cover the $1000 in case of a loss.
The bottom line: renters insurance is a relatively inexpensive product that provides for a fair amount of coverage in the event of a loss or accident. Renters insurance has become more popular, increasing from 29 percent in 2011 to 41 percent in 2016, but the overwhelming majority of renters are leaving themselves exposed to liability and their possessions to chance. For such a low cost, why risk it? We recommend researching at least three separate renters insurance companies to compare prices, coverages, and discounts.