Car insurance, boat insurance, life insurance: for every worry in life, it seems like there’s a way to insure it. On the other hand, renter’s insurance is a useful alternative for those who don’t own a home or a boat but want to ensure their valuables and living space receive similar protections. As of 2020, only about 57% of American renters have some form of insurance, compared to around 85% of homeowners. With that in mind, the team at RentHop has compiled a list of pros and cons, tips for any renter considering insuring their valuables, and the best ways to avoid overpaying!
What is Renter’s Insurance?
Renter’s insurance is a policy that covers a renter’s items of personal or financial value in case of loss or damages. While typically, homeowner’s insurance may cover physical damages like roof leaks, fences, and air conditioning units, renter’s insurance covers personal property, personal liability, and loss of use. Renter’s insurance typically covers personal property: electronics, clothes, furniture, sports equipment, and other appliances. Jewelry and collectibles depend on the policy. Renter’s insurance often covers these items at home and when you’re out and about. If your insured tablet computer is stolen from your car while away from home, the coverage will still be active. The flexibility and range of renter’s insurance make it a great option for various living situations. Insurance applies to single-family studios to co-ops and other communal living situations.
Who Needs Renter’s Insurance?
While most states do not require that tenants acquire insurance, landlords can require a policy in the lease. Renters typically have a month to acquire a policy after moving in. Most housing professionals recommend that renters acquire a policy, even if their local government or landlord does not require one. The landlord’s insurance typically only covers the building but excludes your personal possessions. If there is a robbery, natural disaster, or another emergency, you’re out of luck.
Notably, most policies cover named perils (or covered perils). These are a specific set of situations and conditions that the policy covers. Renters will need to purchase an add-on policy for other scenarios, like an earthquake. Renters who live in areas with a high risk of flooding or other unnamed perils should seek out these extended policies as part of their renter’s insurance.
Other Incentives for Purchasing a Policy
Personal Liability
Besides protecting your valuables from damages or theft, many renter’s insurance policies include protections around personal liability and loss of use. Personal Liability is an important facet of renter’s insurance as it protects the renter in some cases should harm befall a guest while on or near their property. For example, if a guest were to be harmed while at your apartment, a personal liability policy could help with the medical bills or any other expenses rendered from the accident if you’re legally responsible. Not every policy includes a personal liability clause, so look closely at your benefits if you’re interested in having it.
It’s Relatively Cheap
Renter’s insurance can usually be bought for dollars daily, with most policies falling between $14 and $22 per month, depending on the coverage. In 2018 national premiums ranged between $126 in North Dakota and $252 annually in Mississippi. Comparatively, depending on where you live, homeowner insurance in 2022 can cost anywhere from $780 to just under $3400 a month! Some newer policies for renter’s insurance start as low as $5 a month. However, at these prices, you’re unlikely to have all of the perks and covered liabilities as traditional renter’s insurance.
Loss of Use
Loss of use, also known as Coverage D, is coverage that reimburses renters in the case that their home becomes uninhabitable for any reason. Short of a natural disaster, many seemingly minuscule issues could render a living space uninhabitable, such as certain types of mold, widespread leaks, or infestation. Loss of use insurance would protect against covered perils and help with expenses if you need to relocate temporarily. Most policies do not cover flooding. However, policies typically cover tornadoes or fires. It’s important to be clear which named perils are specifically covered as part of your loss of use coverage when considering any policy.
What are Covered Perils?
Renter’s Insurance policies are very specific in the types of events covered, and only those listed will result in a payout should they occur. These situations are called named perils or covered perils. Most renter’s insurance covers damages from fire, theft, wind, hail, frozen pipes, vandalism, explosions, and falling objects. Some policies also cover on-site storage units, although that’s not typical. These named liabilities are wide-ranging and not limited to self-contained incidents. For instance, your renter’s insurance will cover a fire that starts in another unit that causes damage to yours, either through smoke damage, fire damage, or water damage from sprinklers, so long as it’s a specifically named peril.
Does Renter’s Insurance Cover Flooding?
Typical insurance policies don’t cover flooding damages for a variety of reasons. Floods can often be catastrophic disasters that result in very expensive claims that many insurance companies aren’t willing to foot for the cost of a base policy. Just an inch of flood water can cause up to $25,000 in damages alone! If, for example, you are a renter whose home falls into a high-risk zone according to the Federal Emergency Management Agency’s (FEMA) flood zone lookup, you qualify for a special program that allows renters to include flood insurance as part of their policies. These renters have access to the National Flood Insurance Program (NFIP), which is made available through FEMA and is backed by a network of more than 50 insurance companies.
Other Common Policy Exclusions
While renter’s insurance is great for covering most of your items as a tenant, a policy does not include every scenario. For high-end electronic equipment, fine jewelry, musical instruments, and certain antiques and collector items, some renter’s policies required the purchase of floater insurance in the form of a rider. A rider is essentially an addition to a policy, while floater insurance covers items and moveable equipment. For musicians, athletes, and others who carry expensive equipment from place to place, it may be worth looking into floater insurance to ensure you’ve covered all your bases.
Renter’s insurance does not usually cover pet damage, although some policies include riders for additional coverage. Personal liability insurance does not typically cover someone’s pet damaging the unit. This is where pet insurance comes in, as most policies cover not only illness, injury, and emergency, but renter’s pet insurance can also cover damages to the property done by the animals in question. Note that renter pet insurance is more specialized than standard pet insurance. If you plan to rent with a pet, take time to closely review and understand the liabilities that the policy covers.
Steps Before Purchasing Renter’s Insurance
Various providers offer unique insurance policies. It’s important to review several options to find the policy that works best for your scenario. The average person has over $35,000 worth of belongings that a landlord’s policy does not cover. It’s worth it taking time to add up the value of your items and purchase a corresponding policy. Personal property is the main component of renter’s insurance. Doing a home inventory, starting with expensive things and working your way through all of your belongings, is a good way to estimate the worth of your covered items. Make sure to take pictures and write down the value of each item as you go. Using this information, you can choose which policy and deductible are right for you.
Conclusion
Being a renter can be expensive, especially when the unexpected happens and expenses arrive. With anxiety and stress on the rise, acquiring it may be one of your best tools to gain more autonomy. Renter’s insurance is a smart and cost-effective way to ensure the safety of your items. It’s flexible enough to cover any living situation, providing peace of mind and security.
Editor’s Note: We updated this article to enhance readability.
