Renters’ insurance typically isn’t a top priority for most new tenants.
You have a lot on your plate when you’re moving into a new space.
However, renter’s insurance is more important than most people think.
For starters, most landlord’s insurance won’t cover your personal property. And you’ll want coverage for your belongings.
Beyond this reason, though, if someone sustains an injury or has an accident at your place, you could be sued. And you’ll want coverage to protect yourself from liability.
So, with these things in mind, let’s look at the benefits of renter’s insurance and why you should buy it in more detail.
What is Renters’ Insurance?
Renters’ insurance is a form of property insurance that covers losses to personal property and protects the insured from liability claims. That said, injuries due to structural problems are your landlord’s responsibility. Renters’ insurance protects anything from a studio apartment to an entire house or mobile home.
Most renters’ insurance has three basic coverage elements: personal possessions, liability and additional living expenses.
Personal Possessions
This piece of the coverage covers your personal belongings. Examples include clothes, furniture and electronics. This coverage can help pay for the repair and replacement of items in the event of specific events, also known as perils:
- Fire or lightning.
- Windstorm or hail.
- Theft.
- Smoke.
- Vandalism or malicious mischief.
- Explosion.
- Volcanic eruption.
- A falling item.
- The weight of ice, snow or sleet.
- Riot or civil commotion.
- Accidental discharge of water or steam from within certain household systems or appliances.
- Sudden and accidental tearing apart, cracking, burning or bulging of certain household systems.
- Freezing of certain household systems or appliances.
- Sudden, accidental damage from artificially generated electric currents.
- Damage caused by vehicles or aircraft.
This coverage applies whether items are in your residence or outside of your residence. As long as you own the items, they fall under this coverage. That said, there is typically a limit on how much insurance will pay for items damaged outside your home. The average here is 10% of your total personal property limit.
Liability Insurance
This portion of the coverage protects you if you are sued. Lawsuits can be incredible financial burdens, so this is a key part of renters’ insurance.
If someone gets injured on or off your property, liability insurance can save you thousands of dollars.
There are a couple things to note, though. First, if you injure someone in a car accident, that pertains to your automobile insurance policy. Second, if you have a dog and it bites someone, insurance may not cover the damage. Certain insurance policies have breed restrictions or clauses exempting coverage for dog bites. Thus, be sure to ask your agent about these items before you purchase insurance.
Additional Living Expenses
Renters’ insurance usually covers you to live at an alternative place in the event a covered disaster damages your current living space. Items like hotel bills, restaurant meals, temporary rentals, and other expenses while your original place is repaired are all included.
Generally, if you find yourself in this situation, you fill out an additional living expenses worksheet and get reimbursed. However, these is usually a limit, and it’s often a percentage of your homeowners insurance dwelling coverage.
The Other Benefits
Many of the benefits regarding renters’ insurance are present in what we just talked about. It covers damage to personal property, protects you against liability and is a safety net if you must move temporarily due to disasters.
But, these aren’t the only benefits. It’s also affordable and your landlord may require it. If your landlord requires it, you must purchase a policy. That said, it’s a good idea even if your landlord doesn’t require it.
In terms of affordability, it’s logical to buy something that could save you substantial money if an unforeseen circumstance arises. The average renters’ insurance policy cost $15 to $30 per month in 2022, according to the National Association of Insurance Commissioners (NAIC). Your final cost will depend on multiple elements, including how much coverage you need, the kind of coverage you choose, the amount of your deductible, and where you’re located.
You are responsible for other costs as well, though. Almost every insurance plan has a deductible. These are often anywhere from a couple hundred dollars to a couple thousand dollars. You must pay this deductible before the plan covers losses.
Furthermore, your specific policy’s limitations may impact how much your insurance company will pay (this can also add to the cost). Thus, it’s vital to choose a plan that pays out enough to cover your most valuable possessions.
Why do You Need Insurance if Your Landlord Already has it?
Despite the benefits of renters’ insurance, this is a fair question. After all, how many different kinds of insurance are necessary when they all seem to cover the same property?
A landlord’s insurance doesn’t cover your possessions or liability as we mentioned earlier. So, you can probably imagine how important this distinction is. Let’s look at a few scenarios where your lack of renters’ insurance could be extremely costly:
- You come home from a family dinner to find belongings stolen.
- You try to bake a cake and start a fire in the kitchen. The smoke invades your neighbor’s property and causes damage.
- Your partner’s friend trips on a box you left out the day before and sustains an injury.
Everything you own or could be held liable for is covered by renters’ insurance. Without this insurance, you open yourself up to all kinds of potential issues.
On the other hand, everything your landlord owns or could be held liable for is covered by their insurance. Thus, the distinction is critical. Your landlord’s insurance covers the rental itself, sheds, garages, etc. Their insurance covers repair expenses for property damage and structural issues not caused by your negligence.
By understanding the clear separation between your landlord’s insurance and your own, you can see the importance of purchasing renters’ insurance.
Conclusion
As a tenant, it’s best to be proactive instead of reactive whenever possible. Renters’ insurance is a good opportunity to put this practice into place.
You don’t want to react to a burglary after it happens. You want to have a safeguard in place in case it happens.
Purchasing renters’ insurance protects you and is a worthwhile cost to make sure you don’t get stuck with exorbitant losses if something goes wrong.
For more helpful tips when renting, check out our tenant guide here.
