If you are a renter what would you do if a fire or other disaster destroyed all your belongings? What if you were forced to find another place to live for a few weeks while repairs were being made? What if a repairman slipped and fell, was seriously injured and chose to sue you?
The answer to those questions is renter’s insurance. A 2006 study by the Insurance Research Council however found that while 96% of home owners have homeowner’s insurance, less than half of renters have renter’s insurance.
What about the landlord’s policy?
Many renters mistakenly believe that they are covered by the landlord’s insurance should something happen. This is not true. In fact since the landlord does not own your personal property, the landlord couldn’t insure it even if he wanted to. The landlord’s insurance covers the physical dwelling, but it does nothing to cover your personal possessions.
So what is renter’s insurance?
Renter’s insurance is very much like homeowner’s insurance. Many of the same considerations apply. The primary difference is simply that the dwelling isn’t covered.
So what coverage do you need?
Coverage for personal belongings
First, as with a homeowners policy, renter’s insurance will cover you for the loss of your personal property in the event of a disaster.
You need to verify what types of “disasters” will be covered by your insurance. For example, as with most home owners policies, you may not be covered for flood damage unless you specifically add that coverage. Be sure to discuss with your agent what is covered and what is not.
As with most insurance policies you will also have a deductible. The higher deductible you choose the lower your rates, but the more out of pocket costs you will have if you need to make a claim. If you have a good emergency fund you can consider increasing the deductible to save some money.
Another consideration is replacement cost. If you don’t have replacement cost then you will be reimbursed based on the current value of your possessions. That means that you won’t get much money for that 20 year old 19 inch TV your parents gave you. If you have replacement cost, then you’ll be able to get a brand new TV to replace the one that was destroyed. This can be a very big deal. You want to have replacement cost if at all possible.
If your rental home is severely damaged, you may not be able to live there while repairs are being made. A good renter’s insurance policy will provide you with money to cover the cost of a hotel or other alternative lodging, even restaurant meals, while repairs are being made.
This might be the most important reason to have renter’s insurance. Sadly we live in a very litigious society. If some one were to get hurt while in your home, you could potentially be sued. Having a good amount of liability coverage will protect you in the event that were to happen.
The amount of liability coverage you need depends a little bit on how much money you have. The more you have the more of a target you are for a lawsuit. If you have very little in the way of savings or possessions, there won’t be much for someone to get from you. In any case though having liability coverage may protect you from being forced to declare bankruptcy.
Lastly, if you have any special property you may need extra coverage. Perhaps you have a special coin collection that is worth a great deal of money. Perhaps some heirloom jewelry that is exceptionally valuable. Generally, policies cover a standard amount of property. (You need to understand what is covered.) If you have some unusual items they may not be covered. You can usually add this coverage by getting a special rider added to provide coverage for your unique items.
Renter’s insurance not an option
If you are a renter, having proper renter’s insurance coverage is not an option. It is a necessity. Insurance is one of those unusual items we buy that we hope we never use. But it is critical you have sufficient coverage, to protect you in the event of a disaster. Be aware that if you are a renter, your landlord’s policy will protect the dwelling only. You are not covered by the landlord’s policy, so it is up to you to make sure that you cover your possessions with a renter’s policy. The good news is that renter’s insurance is usually not that expensive. You can’t afford to take the chance of not being covered.
Photo credit: turkeychik (creative commons)