As a renter, when you first move into a new place, the financial requirements can be a little overwhelming. At least two month’s rent, changing over utility and water bills, paying movers and usually some new furniture to meet the organizational and layout needs of a new pad. It can be hard to stomach the idea of adding insurance to that mix.
After all, having insurance only applies when you own a house, right? Not exactly.
While your landlord probably has coverage for his or her own liabilities, it does not cover any of your personal belongings. That couch you own, the laptop you keep at home, and the various other items you have accumulated over the years would not be covered if your new rental fell victim to water damage, fire or theft.
So for the (often) affordable price of rental insurance, it can be absolutely worth it to secure coverage to protect your belongings. Here, learn more about what renters insurance covers and who might need it.
What is renters insurance and how does it work?
Renters insurance helps protect you and your belongings. Most renters insurance policies will not only cover the replacement of your belongings like your laptop, tv, and couch, but also includes liability coverage if someone is injured in your home, living expenses (like a hotel) should your rental become uninhabitable, and even losses outside of your home.
“My neighbor left a candle burning one day and the whole corner of our three-story building was on fire by lunchtime. I found out my renters insurance covered a hotel room and the cost to have the smoke smell cleaned out of my clothing and furniture,” says Kim R. in San Diego. “What an unexpected relief. I had bought it for the theft coverage.”
As with any other insurance policy, you will be responsible for paying monthly premiums, as well as any deductibles included in your policy. In exchange for paying your monthly premiums and assuming responsibility for your deductible, your renters insurance policy will cover you financially for losses and liabilities associated with your living space.
Do you really need renters insurance?
I learned the hard way that renters insurance is definitely worth it.
When I was a graduate student, I lived in a $500 per-month apartment and paid about $10 per month in renters insurance.
One night, I went out with a friend for a fun evening on the town. She drove to a cool spot, and we both left our laptops in the backseat of her car as we headed out on foot. (Graduate students are never far from their laptops.) When we returned, her window was smashed, and the laptops were gone.
Needless to say, we were both pretty upset — not just because of the missing hardware, but because neither of us had bothered to keep backups of our important files. We would have to start our gigantic essays all over again, from scratch.
It was especially upsetting to contemplate forking over $1,500 (or more) for a new computer.
Then I remembered my renters insurance.
To be honest, I wasn’t sure if it would cover a laptop stolen from the back of a friend’s car, 15 miles away from my apartment. The representative from my insurance company assured me that my policy covered most things that essentially belonged within my apartment.
In the end, I had to pay the $250 deductible, but my insurance covered the rest.
My monthly premiums were definitely worth it.
(Also, remember to always backup your important files and pictures on a hard drive.)
What does renters insurance cover?
Here is what you can expect a typical renters insurance policy to cover. The amount of compensation you receive will depend on the specifics of your policy.
Basic policies cover property that is destroyed, damaged, lost or stolen. Some policies cover replacement cost, while others cover only the market value. For example, in the case of a stolen computer, the current market value is one amount (usually less), and the replacement cost is another amount (usually more), so consider this limitation carefully when you shop policies.
Renters insurance can also cover your property even when it’s not in your home at the time the loss was incurred, as was the case with my laptop.
Your policy can also provide protection to others, such as neighbors whose property is damaged by an event (think plumbing problem, for example) that happens in your home.
If you are legally responsible to pay when someone is injured in your residence, your renters insurance could protect you. Liability coverage in most renters insurance policies is meant to help you if you are held liable for injury, death, or damage to property that arises from your rental. This can come into play if a guest takes a fall in your kitchen, or if your child starts a fire that spreads throughout your building.
If your apartment becomes uninhabitable for some reason, renters insurance will help cover the cost of staying somewhere else.
If your neighborhood experiences a power failure and all the food in your fridge goes bad, your renters insurance might cover the cost to replace it.
Limitations of renters insurance
All renters insurance policies come with coverage limits that vary from policy to policy. For example, property coverage might be limited to $5,000, and liability coverage might be limited to $100,000. Your exact coverage will depend upon your policy and more coverage usually translates into higher premiums.
In addition, most renters insurance policies do not cover:
- automobiles (this should be covered by auto insurance)
- recreational vehicles
- uniquely valuable items such as jewelry and collectibles
- dog bites (especially from certain breeds)
- pest infestations
- items inside rented storage units (this should be covered by the storage facility’s insurance)
- natural floods, and
- natural wear and tear (e.g. a television that stops working after 10 years)
Remember, renters insurance is meant to cover you and your property from things like theft, fire, vandalism, and personal liability.
How much is renters insurance?
Most renters insurance is affordable, usually ranging anywhere from $100 to $250 per year with most major insurance companies.
“I think renters insurance is a must-have for how affordable it is,” remarks Naoki, lead data analyst at Haven Life. “I pay around $5 a month through Lemonade.”
Jetty, another startup providing renters insurance, advertises plans at around $10 per month.
Keep in mind that the premium amounts for coverage will depend on how comprehensive your coverage is. Don’t always pick the cheapest option. Ensure you’re getting the best value for your coverage.
How much renters insurance do you need?
The best way to determine how much insurance you need is to make an itemized list of all the property in your home that you cannot afford to lose. Estimate the replacement cost of each item, and add it all up. That figure should be a very good estimate of the coverage you need.
For liability insurance, your insurer may suggest a coverage level that is typical for your area or budget.
For any renters insurance policy, you will need coverage in three general areas:
- Property: consider enough to replace all of your possessions in the event of a fire or other total loss
- Liability: most policies start this coverage at $100,000
- Additional riders: This includes any special coverage you might need for items not usually covered in a standard policy, such as jewelry and collectibles
Where to buy affordable renters insurance
Most major insurance companies sell renters insurance. And while you’re looking, you may want to check out a few startups, like Jetty and Lemonade, who have entered the space to streamline the buying process. (Sound familiar?) You can also buy affordable policies through brokerages like Policygenius.
Let’s face it: Having stuff might not automatically make you happy, but losing your stuff can certainly make life more difficult than it needs to be. Renters insurance can help provide peace of mind that if something were to happen to your belongings, there’s a backup plan in place to help replace them. And, at a nominal cost per month, it’s usually worth it for renters.
Nikolas Jintri is a writer, musician, mentalist, and educator who teaches rhetoric and critical thinking at Temple University in Philadelphia.
The opinions expressed in this article are the author’s own. Haven Life Insurance Agency offers this as educational information only. Haven Life does not endorse or offer the products, services and/or companies discussed here.