Do You Need Renters Insurance?
October 5, 2020
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If you, like most Americans, rent your home, you should consider renters insurance.
Renters insurance protects the personal items and liability of people who rent homes, not the home itself.
Let’s look at the different protections this insurance offers and how much insurance you should get when renting.
What does renters insurance cover?
Although every provider offers different policies, there are a few common coverages.
Coverage is protection for a specific situation—like your TV being stolen. In this case, the personal property coverage included in renters insurance would pay for the cost of replacing your TV.
Another important term is a peril, which is a situation, such as a natural disaster, that damages whatever the insurance is trying to protect. Theft, fire and windstorms are perils commonly covered by renters insurance.
Now let’s look at the common coverages included in renters insurance policies:
- Personal Property
This coverage pays for personal belongings if they are damaged or destroyed by a peril that’s covered in the policy. The coverage will pay up to the limit stated in the policy.
- Personal Liability
This coverage pays for the legal expenses if someone is hurt in the home you’re renting and sues you. Personal liability coverage could also pay for things like lost wages after the person is injured.
- Medical protection
This coverage pays for medical bills and expenses when someone is injured on the property you rent. There are usually strict limits on when and how this coverage pays claims.
- Loss of use
This coverage pays for the expenses that come from having to stay somewhere else if your rental home becomes unlivable due to a covered peril, such as a fire. Loss of use coverage could pay for things like hotel rooms and food expenses.
Many renters insurance providers also offer add-on coverages. These optional coverages allow renters to personalize their policies to fit their needs.
Usually, you’d use optional coverage to add insurance for expensive items in your home, like jewelry or electronics.
For example, if you have an expensive jewelry collection, the standard coverage limit for personal property might not be enough to replace the stolen jewelry. In this case, you could buy a higher coverage limit for your jewelry that could cover the cost of replacing it.
Benefits of renters insurance
Renters insurance prepares you for emergencies.
Most of us don’t have enough money socked away to replace stolen personal items or move if your rental home is damaged.
Although these situations hopefully don’t happen often, they do happen. So, it’s worth considering taking up a policy.
The personal property coverage included in most renters insurance policies also covers your items outside of the home. So if your smartphone is stolen from your car, then the personal property coverage could pay to replace it.
Is renters insurance required?
There are no federal or state laws that require renters insurance. But it’s common for landlords and property management companies to require it for their tenants.
The reason for this is that property owners want to limit their liability if something happens to the rental and the tenant is affected.
If the rental is damaged or destroyed, and the rental’s owner is found to be even partly liable, then the tenant might be able to sue.
If the tenant is required to have renter’s insurance, then the policy will probably cover any loss the tenant experiences, so they will have less of a reason to sue the landlord.
How much renters insurance should I buy?
First off, renters insurance is very affordable compared to other kinds of insurance.
According to the Insurance Information Institute, the average annual cost of renters insurance in the U.S. is $180.
That means for most standard policies, renters can expect to pay less than $20 per month.
Each coverage included in the policy will have a separate limit.
A coverage limit will be the maximum amount the policy will pay if a claim is filed. Make sure each coverage limit will cover your expenses if you need to file a claim.
Each coverage will also come with a deductible, which is the cash amount you must pay out of pocket before the coverage kicks in and pays the rest.
Many providers allow you to choose your own coverage deductibles. Generally, the higher the deductible, the lower the premium, which is the monthly cost of the policy.
Ask yourself these questions when you’re looking at policies:
Can you cover the costs of staying somewhere else? Can you pay to replace items that might be damaged in the emergency?
Looking for a rental insurance policy today? We recommend our friends over at Lemonade. They have a great reputation, some of the lowest rates around, and are changing the insurance industry.
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