Should You Get Renters Insurance?

Living in a rented property has many advantages. It makes life easier and frees you from the responsibilities that come with homeownership, like protecting your home from burglars, floods, storms, and fire.

But what happens when you lose or damage your belongings due to a fire at your rented property? Or when your beloved Labrador injures a guest? Unfortunately, being a tenant doesn’t spare you from the costs of damages and liabilities that arise in these situations. So, you’ll need to bear all the resulting expenses.

This is where renters insurance could come to your rescue. It could provide an important safety net for renters, much like how home insurance policies safeguard homeowners. Yet, many tenants choose not to have one, unless their landlords insist.

Of course, there are several reasons for this trend. Some tenants assume that they’re covered by the landlord’s policy, while others worry about unaffordable premiums. In fact, many don’t realize they need one until they face a legal liability or loss of personal belongings.

The truth is, renters and homeowners often experience similar types of risks. But various ambiguities and misconceptions prevent renters from seeking insurance. So, in this article, we’ll dive into some of the common questions about insurance policies for tenants, including renters insurance cost and the benefits they offer.

What exactly is renters insurance?

Renters insurance protects tenants by providing coverage for their personal belongings. And its liability coverage safeguards you from certain liabilities you’re responsible for.

Here are the typical risks covered by a renters insurance policy.

• Loss or damage to personal belongings due to theft, vandalism, fire, smoke, natural disasters like storms, or water damage from plumbing, water heater, and the likes.
• Damage to the property caused by the tenant or a family member living in the rented apartment or house.
• Injuries suffered by a guest at the rented property due to negligence of the tenant. This also includes dog attacks.
• Additional living expenses incurred in instances where the tenant must temporarily evacuate the premises due to covered property damages.

Of course, the risks covered could differ between renters insurance companies. For example, some may even include belongings stolen outside the rented property. Others might exclude aggressive dog breeds from the policy. So, reading the fine print and understanding the coverage provided is important before signing up. 

Now, some landlords have made it mandatory for their tenants to have renters insurance. It protects them from liabilities if the tenant’s belongings are damaged or lost during an incident like a fire or burglary. It also ensures they are compensated if the tenant causes any damage to their property.

But the role of renters insurance extends far beyond just fulfilling conditions of a leasing agreement. This type of policy has distinct advantages that could help tenants protect their financial wealth.

Benefit of renters insurance

So, is renter’s insurance really worth it? Here are some compelling reasons why you may need a renters insurance policy.

1. Affordable coverage for your personal belongings.

Renters insurance cost is relatively affordable, with monthly premiums typically in the range of $15-40. This is an insignificant amount for many renters, especially considering what they would normally spend on their groceries or eating out. 

Besides, most tenants have personal belongings worth much more than they think. Electronics like TVs and laptops, jewelry, clothes, furniture, and appliances could be pretty costly to replace. And a $40 premium to protect them might seem negligible when you consider their true worth.

2. Gives you coverage that the landlord’s policy doesn’t.

A landlord’s policy usually covers only the property, not the tenant’s belongings inside. In other words, it will not compensate you for any damages or loss experienced during a theft, storm, or similar event. And without coverage, you could face serious financial loss. But a renters insurance could protect your personal belongings in such instances.

3. Protects you from liabilities for which you are responsible.

What happens when a guest slips and gets injured at your home? Or if they get attacked by your dog? You’ll have to pay for medical expenses out of your own pocket. And if your guest decides to take you to court, be prepared to pay up legal fines, too. But you wouldn’t have to worry when you have liability coverage with a renters insurance policy. It can cover expenses such as legal fees, compensation, and medical bills so you wouldn’t have to bear the cost.

4. Covers additional living expenses (ALE) in times of crisis.

Suppose you ever need to live elsewhere while your rented property undergoes repairs due to a hurricane or fire. Naturally, you’ll need to pay for additional expenses such as temporary rents, hotel charges, and meals. These could add up to a significant amount, even over a short period.

An ALE coverage that often comes with renters insurance is designed to help you in these circumstances. They allow you to claim additional living expenses arising from a covered disaster up to a set value or within an agreed period.

How much does renters insurance cost?

The average renters insurance cost hovers around $179 per year. Needless to say, personal belongings are far less costly to repair or replace than a property. So renters insurance is fairly affordable when you compare it with the average homeowner’s insurance that stands at $1249. And stiff competition among renters insurance companies has also helped keep premium costs in check.

But remember, your premium could vary depending on two main factors: the state you live in and the coverage you need.

For example, insurance costs are significantly high in states like Mississippi, Oklahoma, and Alabama that face regular weather-related catastrophes. And states like North and South Dakota, Iowa, and Minnesota have some of the lowest premiums in the US.

The coverage is, of course, dependent on your personal requirements. For example, it could vary based on the items you want to cover. Your payout preferences could also affect the premium: naturally, premium fees would be higher if you expect compensation to replace your belongings instead of their cash value at the time of loss or damage. And if you own a dog, you might want to consider a higher coverage to protect you against possible liabilities.

But overall, renters insurance cost is not as high as most people assume. On average, you can expect to pay around 2.6% of your total rental costs.

It’s also interesting to note that the average renters insurance premium has steadily declined over the past few years. According to Bankrate estimates, it has decreased from $190 to $179 over the five years leading up to 2018.

What renters insurance doesn’t cover

There are a few risks that this type of insurance policy usually doesn’t cover:

• Damages to your roommate’s personal belongings. The premium will only cover the policyholder’s property. So, renters insurance companies advise that each roommate gets their own policy.
• Damages to the property due to no fault of the tenant. The landlord’s insurance will cover these.
• Damages to personal belongings because of floods or earthquakes. You will need to take separate insurance policies if the area you reside in is prone to earthquakes or flood conditions.

To wrap up

Renters insurance could offer significant benefits to tenants by protecting them against damages to personal belongings and costly liabilities, all with an affordable premium.

Many renters insurance companies such as State Farm and MetLife offer competitive policies that are customizable. Most insurers even offer online quotes, multi-policy discounts, and various other incentives to attract customers. But before signing up, make sure you read the fine print and compare premiums, risks covered, and payout limits. And remember to shop around to find what’s best for your needs.

Ready to buy a home? Check out this article on Reverse Mortgages.

Common FAQs