What is renter’s insurance?
If you are living in a rented house, you probably assume that your landlord has insured the house and hence there is nothing for you to worry about. The landlord’s insurance is, however, for the house and not its contents. If you want to protect your belongings from risks, you need to take additional insurance. This is called renter’s insurance. This is insurance taken by someone who rents a house or apartment to protect his/her belongings from any risk. All your belongings can be covered under renter’s insurance. Taking this insurance protects you in the event of occurrence of a fire, theft or vandalism.
Renter’s insurance doesn’t just protect your belongings from risk. It also can protect you from liabilities. Most insurance policies protect you against damage caused due to negligence. For example, a fire in your house due to your negligence may spread to your neighbor’s house causing damages. You would then be liable to face a lawsuit. Renter’s insurance can protect you against this liability.
If you lose your belongings to a disaster or theft, you may not be able to continue to live in your house or apartment. For instance, in case of a fire you may need to temporarily shift to a hotel until your renovation work is complete. This costs money and a renter’s insurance can help pay for it. Your stay at an alternate place and living expenses would be covered under a renter’s insurance.
What does it cover?
When you take out a renter’s insurance policy, it would cover the following:
- Loss to your personal belongings, while staying at a rented accommodation. The value of the belongings needs to be determined by you and based on this you need to decide the insurance coverage value. The insurance protects you against fire, theft, vandalism, water leakage, problems caused due to power surge, lightning damage, windstorm, and impact from a vehicular accident. Most incidents like a fire caused by forgetting to turn off the oven or water leakage caused by an overloaded washing machine would be covered.
Renter’s insurance does not cover natural disasters like earthquakes and floods. If you want them to be covered, you need to purchase additional insurance for it.
- Living expenses, if you have to move out of your home due to the loss of belongings, is also covered by most policies. Daily rental and food expenses would be covered until the repair/renovation work is complete.
- Personal liability is also covered. This includes injuries caused to others or damages caused to others because of your negligence. For example, your dog may bite a neighbor. Renter’s insurance will cover a potential lawsuit by paying for the neighbor’s treatment. Similarly, an injury suffered by a guest in your house or damage to a neighbor’s house because of negligence committed in your house is also covered. You need to read the fine print to the complete coverage.
What does it not cover?
The following are NOT covered by the renter’s insurance.
- Valuable items like jewelry and collectors’ items are not covered in renter’s insurance. If you want these to be included, you need to ask for additional coverage.
- Damage to a vehicle in your home is not covered by this policy.
- If you are running a business from your home, loss to property belonging to your business will not be covered. You may need additional coverage.
How much does renter’s insurance cost?
Now that you have understood all there is to know about renter’s insurance and how important the coverage is you will need to decide if you want cash value coverage or replacement cost coverage. The former will pay for the value of your belongings lost or damaged, while the latter pays you the cost incurred to replace the belongings.
You need to make a complete inventory of all your possessions and work out the value of your belongings and the amount for personal liability. This amount determines the premium you have to pay for your renter’s insurance. The value of the premium amount would vary depending on where you stay. You can also shop around, contact different insurance providers and compare costs before you buy.
The best part of renter’s insurance is that it hardly costs much. By paying around $17 as insurance amount per month to get a policy with decent coverage. You should be able to get a policy that covers around $40,000 of your belongings, with a liability coverage of $100,000. It would also include a deductible of $1,000, which is the amount you need to pay from your pocket, in case of a claim[i].
The following are a few things to keep in mind while buying a renter’s insurance policy:
- The amount covered by the policy determines how much you have to pay. Do a proper valuation of your belongings. Don’t take a higher coverage just because an agent pressurizes you.
- If you have adequate security measures in your house against fire and theft (e.g.: smoke detectors, burglar alarms), then you can get a discount on the amount you need to pay.
- If you buy a renter’s insurance from an insurer with whom you have other policies, like a car insurance; then you can expect a discount.
- Jewelry would be covered for a maximum of $1,500. You may, therefore, need additional coverage for your jewelry[ii].
- If you want a higher-end coverage with $60,000 for belongings, $300,000 liability and $1000 deductible, you would still have to pay less than $25 every month. iii
Renter’s insurance is not all that expensive. Taking out a policy protects your belongings and gives you protection against personal liability.