Rental application. Credit report. Income statement. Lease. Guarantor. Roommate agreement. Renters insurance.
These are just a few of the terms you’re probably entirely too familiar with if you’re in the process of relocating. And by entirely too familiar, of course, I mean that you’ve heard them thrown around a million and a half times but still find yourself unsure about the details of each one.
Today, we’re going to focus on renters insurance.
What is renters insurance?
Renters insurance provides tenants with coverage in the case of theft, loss, damage, or injury to personal belongings.
Typically, apartment buildings are covered by the landlord or property owner’s insurance policy, but there are some limitations to this when it comes to the tenant. For example, if your personal property is damaged in a building fire, or if someone is injured while inside your apartment, your landlord will not be held responsible for any property that they do not own. This is where renters insurance comes in!
Do I have to get renters insurance?
It is not mandatory to have renters insurance in the US, but landlords are allowed to require it if they so choose.
It’s fairly common for younger renters to feel like renters insurance is an extra and unnecessary expense. If you find yourself thinking, “but I don’t even own anything that valuable,” think again! Although you might not have a $1.8 million necklace sitting in your bedroom, when you put together the respective values of everything you own, it adds up in a way that might surprise you. According to State Farm, the average person has over $35,000 worth of belongings that are probably not covered by a landlord’s policy. The Insurance Information Institute (III) recommends creating a home inventory when beginning the process of taking out a renters insurance policy to get a better idea of this value as it pertains to you.
Imagine a scenario where you lost everything inside your apartment; from your bed to your dresser to your running sneakers to your dishes to that $10 top you got last week at H&M. Would you be able to start over with absolutely nothing and replace your (what you thought were low-value) belongings?
What does renters insurance cover?
There are three main buckets of coverage for renters insurance. The first includes replacement of personal items that are damaged or lost, in a theft or fire, for instance. A basic renters insurance policy will reimburse you for the exact value of all of your lost items. At a more premium level, you’ll be able to receive coverage for the full cost of replacing the items (this is worth springing for if many of your items or old and/or worn).
The second benefit of renters insurance covers your liability should someone face an injury in your apartment. If something happens to someone in your apartment that leads to that person getting stitches – to go with somewhat of an extreme example – your renters insurance policy could cover the costs of those medical bills.
Lastly, renters insurance can help cover costs of temporary living arrangements if your apartment is too damaged – from smoke, for example – to live in. This cost is not covered by the landlord or his/her insurance policy.
How does it actually work?
Depending on the type of plan you purchase, your renters insurance will likely kick in after a predetermined deductible. This is the amount of money you’ll have to spend on damages out of pocket before the insurance coverage kicks in and covers the rest of the cost. The higher the premium – how much you’re paying for the policy – the lower the deductible tends to be.
How much does renters insurance cost?
The average cost of renters insurance is much lower than that of homeowners insurance due to the fact that it only covers the items within your home, rather than the home itself. This is good news for renters on a budget (over half of whom don’t have renters insurance!). According to the National Association of Insurance Commissioners, the average cost of renters insurance ranges around $180-200 per year. That comes down to around $15 per month! Two beers’ worth of spend in exchange for eternal peace of mind.
What do I do now?
I must admit, up until this very moment, I did not believe I needed renters insurance. In fact, I’ve lived in an apartment for 5 years without it. Now, though, I have officially convinced myself to go out and get a policy. Here’s where I’m going to go and I hope you do the same.