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What You Need to Know About Renters Insurance

Whether you’re renting an apartment or a home, chances are you haven’t given much thought to renters insurance. Sure, insuring a home that you buy makes sense  — but you’re renting. Isn’t insurance your landlord’s responsibility?

Well, yes. Maintaining the home and insuring it does fall on your landlord. But what about the valuable belongings inside of it?

That’s where renters insurance comes in. For a pretty inexpensive monthly premium (on average, about $15/month), you can have peace of mind that your possessions are financially protected if vandalism or disaster strikes.

What is Renters Insurance?

A renters insurance policy, known as an HO-4, covers your losses in case of theft, fire, or other damage. It also offers liability coverage — payment for legal fees and court awards in case of injury or damage due to negligence.

In other words, if someone gets injured in your rental home and sues, renters insurance could help cover those legal costs. If plumbing breaks in your apartment and damages belongings in the apartment beneath yours, renters insurance could help pay for repairs and replacements.

Standard policies also offer additional living expenses for situations where the rental property gets damaged and becomes uninhabitable, displacing you from your home.

You may think, “The chances of those things happening are slim.”

That may be, but it’s best to prepare for the worst. That way, you can breathe — and hope for the best.

What Does My Renters Insurance Policy Cover?

Policies can differ slightly from state to state, and offerings vary between insurance companies. But overall, renters insurance policies are pretty standard. Here’s the nitty-gritty of what they cover:

Personal belongings

Standard HO-4 policies protect your things against damage from the following listed disasters and incidents, called named perils.

  1. Fire or lightning
  2. Windstorm or hail
  3. Explosion
  4. Riot or civil commotion
  5. Damage caused by aircrafts
  6. Damage caused by vehicles
  7. Smoke
  8. Vandalism
  9. Theft
  10. Volcanic eruption
  11. Falling object
  12. Weight of ice, snow, or sleet
  13. Water damage caused by steam, heating, AC, sprinklers or an appliance
  14. Sudden and accidental tearing apart, cracking, burning, or bulging (of a hot water heating system, AC, or sprinkler system)
  15. Freezing of plumbing, AC, sprinkler system, or appliance
  16. Damage caused by short-circuiting

 

Liability

Most policies offer personal liability protection — meaning the policy would help cover the legal costs and court payouts (up to the policy limit) should someone sue you or your family members for bodily harm or property damage.

Liability policy limits typically start at about $100,000. You are able to buy coverage with a higher liability limit.

Note: Liability protection can also pay for damage caused by your pet. Ask your agent about this.

Additional Living Expenses

Should damage make your home uninhabitable, your policy can help cover the costs of living elsewhere. Policies can cover hotel bills or temporary rental costs, meals, and other expenses.

Other

Most policies protect from some losses that you may have not given much thought to, but that you should ask your agent about.

These other types of coverage can include:

    • Medical payments to others, should they get hurt in your home.
    • Credit card and bank forgery, in the event that someone breaks into your home and tries to use your stolen credit card or checks.
    • Other peoples’ property, should their items get damaged or stolen while in your home.

What Doesn’t Renters Insurance Cover?

Like most standard property insurance policies, renters insurance doesn’t cover the following:

Flooding, Earthquakes, and Sinkholes

These natural disasters aren’t covered by renters insurance. For areas where these events often occur (if you live near a fault line or your rental is in a flood zone), think about taking out additional coverage. Ask your agent about the weather events common to your area, and plan accordingly.

Maintenance Damage

Home insurance companies rule that it’s the policyholder’s responsibility to take precautionary steps to protect the rental from damage. So, policies will not cover incidents due to lack of maintenance or infestations — like mold or termites.

Big-Ticket Valuables

Expensive belongings like art, jewelry, and antiques may not be covered due to policy limits. All policies come with a coverage limit — some may be as low as $5,000. You can take out supplementary policies (called riders) to cover those valuables. Talk to your agent about this.

How Much Renters Insurance Coverage Do I Need?

To answer this question, you’ll need to make a list. Take out that pen and paper (or go paperless with the list-making app of your choice) and take an inventory of everything you own and every item’s value.

You should also take a picture or video of your rental and your most important belongings — that way you’ll have a lasting record of the stuff you’d want to replace.

Also, think through the big-ticket items you’ll need additional coverage for. (Yes, now is the time to insure that beautiful engagement ring).

Now, tally all of that up. If you can’t get a precise number, at least ballpark it. Your agent will need to know that number.

The valuation of your items will also impact whether you should go with an actual cash value policy (ACV) or a replacement cost value policy (RCV).

  • ACV: Under this type of policy, insurers will pay out the depreciated value of an item. The payout will likely be less than market value and it could cost you more money to replace the item. Note: ACV policies often have lower premiums.
  • RCV: This type of policy pays to replace your lost or damaged belongings with a similar item at the current market value. The payout would be enough to replace your item.

What Will My Deductible Be?

That will depend on the policy you choose. A renters insurance deductible is the amount you will have to pay if you file a claim. The higher the deductible, the lower the monthly premium — but the more you’ll have to pay should the worst case scenario actually occur.

Think through your budget and your risk comfort level. How much of a monthly premium can you afford? Are you able to pay out of pocket if theft or damage actually happens?

How Can I Save on Renters Insurance?

We’re glad you asked! One pretty reliable way to save would be to bundle your renters insurance with your auto insurance. Contact your auto insurance provider and see if there’s a discount!

But don’t just stop there. Shop around.

Whether you want to hire a broker to do the leg work for you or you feel internet savvy enough to do it yourself, get multiple quotes. You have the power and the ability to find the best deal.

The Bottom Line: 

Don’t wait to own a house before you insure your belongings. For a small premium, you can have peace of mind that your belongings are covered, you have liability protection, and you have a safety net if accident or disaster makes your home uninhabitable.

Your landlord’s insurance only goes so far. Take steps to protect what you and your family value most.


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