Joey Hayes Contributer
Dawson Property Management
What is Renter's Insurance and Why Do You Need It?
What happens if your rented apartment is burgled and your valuables get stolen? Will the landlord's insurance policy pay for the replacement of your belongings? What about if the house catches fire and your clothes suffer smoke damage?
These are questions renters rarely ask when they rent an apartment. And of the few who do ask, most assume the wrong answers.
Many tenants are shocked to discover that their landlord's insurance policy does not cover any of their personal items. They wrongly believe that because they live in a property and the owner has insurance, they are automatically covered.
This is far from the truth, landlord insurance rarely covers the tenant's belongings. If this is the case, what protection do tenants have when something bad happens in a rental property? The answer is none… not unless they have renter's insurance.
What is renter's insurance?
Renter's insurance is an insurance policy that covers the personal belongings of people living in a rented property. It ensures that in the event of loss, damage, or injury, the tenants are adequately protected.
Most property owners have some form of insurance in place. But these policies only cover the building and the landlord's belongings. If an incident occurs in the building which results in property damage, the landlord is covered, but the tenant is not. Renters' insurance protects tenants from the risks associated with living in a rental property.
Most renter's insurance offers protection for personal belongings that are lost or damaged through any of these perils: falling objects, theft, fire, smoke, lightning, electrical malfunctions, aircraft or vehicles explosion, volcanic eruption, riot or civil commotion, vandalism or malicious mischief, the weight of ice, snow or sleet, windstorm or hail and water or steam from sources, such as home appliances, plumbing, heating, air conditioning or fire-protective sprinkler systems.
Why you should have renter's insurance
1. It covers losses to personal property
Many tenants, especially younger renters, often think they do not have enough personal belongings to justify buying an insurance policy. But you probably don’t know the monetary worth of what you have and in all probability, your personal belongings exceed $5,000 in value.
If some of those belongings were lost, the cost of replacing them could be out of your reach. Purchasing renter's insurance saves you from the expense of replacing personal items that are damaged or lost.
2. You are protected against liabilities
There is always a possibility that a friend, neighbor, or random person could get injured in your home. There is also a chance that their personal belongings could get damaged. And due to the litigious nature of society, if this happens, you could be personally liable.
In the event that someone claims damages for something that happened in your apartment, renter's insurance will protect you. Most policies offer liability coverage up to $500,000 and medical payment coverage between $1,000 and $5,000.
3. Many landlords require it
Even though the government does not make renter's insurance mandatory, many landlords now require it. Property owners use it as part of their qualification criteria when screening would-be tenants. According to Dawson Management, prospective tenants with renter's insurance are seen as more responsible.
Additionally, a landlord's insurance company might make it a precondition for insuring the owner's property. They do this to ensure that the responsibility for tenants' belongings is not transferred to the landlord. Not having renter's insurance may keep you from living in the type of accommodations you prefer.
4. It provides coverage when you travel
The protection afforded by renter's insurance is not limited to the confines of your living quarters. If you suffer property loss or damage while away from your home, the policy still covers you. This means you have insurance coverage for events that happen in your home, as well as, in a vehicle or when you travel.
5. It covers additional living expenses
If for some reason, your apartment becomes uninhabitable and you are forced to move out, the policy could cover the cost of temporary living arrangements. For instance, if the apartment is damaged because the roof caved in, you do not have to pay out-of-pocket to stay in a motel. The policy will take care of your expenses, for a limited period.
How much does renter's insurance cost?
This is the number one reason why most tenants do not have renter's insurance; they think it must be expensive. But renter's insurance is dirt cheap. For less than $300 a year, you will have more than enough coverage. And in some cases, the cost of renter's insurance can be less than $200 a year and not up to a dollar a day.
This means that for less than the amount you spend on coffee every day, you can get coverage for your belongings and against personal liabilities. There is really no reason not to have renter's insurance; it is cheap and the value is almost immeasurable.
But when buying your insurance policy, make sure you buy one that offers the replacement cost value (RCV) of items rather than their actual cash value (ACV). Policies that offer ACV are cheaper, but RCV insurance offers more value. And that small factor can make all the difference.