Despite offering broad coverage at a reasonable cost, renters insurance is often overlooked. Just 41 percent of renters are covered by insurance, while homeowners cover themselves at a rate of 93 percent. Quite a few misconceptions surround renters insurance. Many renters think they don’t own enough property to justify buying insurance or that their landlord’s insurance policy will cover them. It’s important to understand what exactly renters insurance is and how it can help cover you in case of loss.
Read More: What Is Renters Insurance?
TL;DR (Too Long; Didn't Read)
Renters insurance covers the damage or loss of your personal property due to fire, theft, lightning, smoke, freezing, vandalism and more. It can also cover you in certain situations of personal liability.
What Does Renters Insurance Cover?
The average renter owns around $20,000 worth of property. Usually, your personal belongings are not covered under your landlord’s insurance policy because your landlord’s insurance covers damage to the property itself, not to your personal stuff. In case of a fire or similar catastrophe, losing all of your worldly possessions could be devastating to your finances. Enter renters insurance.
Renters insurance will cover your stuff in case of theft, burglary, fire, lightning, windstorm, snow, vehicles, freezing, aircraft, building collapse, explosion, smoke, vandalism and even falling objects. Your policy covers you whether your stuff is inside or outside your home. For example, if your bag is stolen while you’re on vacation, your renters insurance will likely cover the loss. If you own a car, property stolen from your vehicle is covered.
Renters insurance can also cover more than just your stuff. If somebody accidentally gets hurt at your apartment, your policy will likely cover some legal and medical expenses. If you accidentally damage someone else’s property, your renters insurance will have your back. Also, if something does happen to your rental unit so that you're unable to stay in your home, your policy will help pay for a place to stay and even cover expenses like meals.
Read More: What is Hazard Insurance?
What Doesn’t Renters Insurance Cover?
Renters insurance is not catch-all coverage. It usually won't cover you in the case of floods or earthquakes. These events can usually be added to your policy at additional cost. For certain valuable items, such as a rare coin collection or a high-end computer, you may need to purchase additional coverage in the form of an insurance rider, also known as a floater. Be sure to check with your renters insurance policy in case additional coverage is necessary for these items.
What Types of Policies Are Offered?
There are two basic types of renters insurance policies: Actual Cash Value (ACV) and Replacement Cost Coverage (RCC). Most basic renters insurance policies are actual cash value policies. This means that your insurance company will pay out for damaged property based on what it’s worth at the time of loss. Most personal property loses value over time, so that couch you bought eight years ago for $1,000 is probably not worth very much. If you have an ACV policy, and your sofa is damaged, your insurance payout will probably not cover the cost of a new sofa of similar quality. That leaves you paying the difference out-of-pocket.
Replacement cost coverage pays out based on the cost of replacing your lost or damaged items with brand new ones. Consider paying a little extra for the RCC plan. Then you won’t have to worry about paying the depreciation cost of your items in case the worst happens.
How to Find Affordable Renters Insurance
The good news is that renters insurance is quite affordable at an average cost of $188 per year. That’s just under $16 each month, or roughly the cost of a large pizza. It’s a good deal for the peace of mind you get, especially when compared to homeowners insurance, which costs an average of $1,173 per year.
Renters insurance policies vary in their coverage and costs. If you’re looking for renters insurance, the Insurance Information Institute suggests getting at least three quotes before you choose a policy. Read each company’s policy carefully, and call a representative if you have any questions. Speaking to someone directly or using an online chat tool can give you an idea of how responsive the company will be in your moment of need. Remember that price isn’t everything. Choose a company that has a solid reputation and responds appropriately to your concerns. Check with the Better Business Bureau to learn more about how each insurance company in your area rates with consumers.
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- Insurance Information Institute: Renters Insurance
- Insurance Information Institute: Facts + Statistics: Homeowners and renters insurance
- Esurance: what does renters insurance cover?
- National Association of Insurance Commissioners: Dwelling Fire, Homeowners Owner Occupied, and Homeowners Tenant and Condominium/Cooperative Unit Owner’s Insurance Report: Data for 2015
- Legal Beagle: Types of Insurance Contracts
- Legal Beagle: What is Hazard Insurance?
- Legal Beagle: What Is Renters Insurance?
- Legal Beagle: How to Deal With Insurance Adjuster After a House Fire
- Legal Beagle: What Does Flood Insurance Cover?
- Legal Beagle: What Does Homeowners Insurance Cover?
Chelsea Levinson earned her J.D. from Cardozo. As a former policy researcher, she has a passion for communicating legal issues to the public. She has created legal and policy content for Vox, Levo, Run For Something and more.