Renters Insurance: Worth It and What Does it Cover?

You’re excited about renting your first apartment. You might be moving out of your parents’ place or leaving college. The prospect of extra freedom, being your own boss, and having your own living space is definitely appealing. But if you’ve never rented before, there’s probably a ton of things going through your mind. You need to make sure your rental agreement is done, you’ve paid your security deposit, and saved enough cash for your first month’s rent. At some point in the process, you’ll hear someone ask: “what about your renters insurance?”

In some cases, part of your rental agreement could require you get renter’s insurance. Family and friends could also give you conflicting advice. Some say that insurance for renters is a must. Others may warn you that you could get cheated on high premiums and deductibles. Then when it comes to the company paying out, you don’t get reimbursed for your claims. 

So, what’s the deal with renter’s insurance? How can you find the best home renter’s insurance to protect all your personal items?

In this article, you’ll learn all you need to know about renter’s insurance. This information will help you choose the best type of policy to make sure you have enough coverage.

What is Renters Insurance?

Also called tenant’s insurance, a renter’s insurance policy covers you from damage to your personal property in your rental accommodation. Insurance for renters provides coverage if there is a fire, flood, or the property gets destroyed. The most common reason to get renters insurance is to reimburse you if someone breaks in and steals your possessions. 

The average cost of renters insurance is not excessive. Yearly premiums can average between $150 and $300 per year. The cost of premiums depends on the following: 

  • Where you live
  • The type of property you rent
  • The level of coverage you need
  • The amount of your deductible 

It’s a mistake to think that just because your landlord has home insurance, all your personal stuff is covered. 

Renter’s insurance is different from homeowner’s insurance. As its name suggests, homeowner’s insurance is for people who own their home. This type of home insurance covers damage to the property as well as personal liability. But, your landlord’s insurance doesn’t protect the personal items of tenants living in their property. 

What Does Renters Insurance Cover?

There are 3 main areas that rental insurance covers – personal items, liability, and additional living expenses. 

So, say, for example, an electrical surge or a burst pipe damage expensive electronics. Your renter’s insurance policy pays the cost of fixing or replacing them. Or, if someone breaks into your apartment and makes off with valuable items, you’ll get reimbursed financially for your loss. 

Your renter’s insurance policy might even cover your stuff if it gets damaged or stolen outside your home. 

Of course, the level of coverage varies based on the premium you pay. Later in the article, you can find out about the difference between “cost value” and “replacement cost value” insurance.

Let’s look in more detail at the main areas that renters insurance covers. 

Personal property

Renters insurance covers anything you own. This includes furniture, electronics, clothing, and anything else that is yours. 

What your average renter’s insurance doesn’t cover is fine art and jewelry. So, if you are fortunate enough to own a masterpiece painting or expensive diamond bracelet, you will need to get additional cover. 

Liability

What many tenants forget is that renters insurance is worth it in case someone injures themselves on the property. For example, a plumber is fixing a leaking pipe, and he trips on a rug. He then decides to sue you for his personal injury. What are you going to do? Your renter’s insurance company will cover the high cost of his medical treatment.

You are also covered if you mistakenly damage someone else’s property.

Additional living expenses

Have you thought about what you’d do if you have to find temporary accommodation while your place is cleaned up after a flood, fire, or storm? If there is so much damage that you can’t live in your apartment, your insurance pays for hotel bills. 

Is Renters Insurance Worth It?

The simple answer is: yes. If you are renting an apartment or home, buying a renters insurance policy is almost always worth it. Even if your landlord doesn’t require it, you should seriously consider it. 

Think about it. For a low monthly premium, you can get coverage for the following:

  • Between $20,00 and $30,000 or even more for personal possessions
  • $100,000 for personal liability
  • Between $4,000 and $6,000 for living in temporary accommodation

Of course, the exact amount of coverage you get depends on your premiums and deductibles. 

To make sure that you don’t get ripped off and you get reimbursed for claims, there are a few things to know about renters (tenants) insurance.

Get adequate renters insurance

First of all, you need to create an inventory of all your personal possessions. You should then calculate the value of replacing them. Making an accurate calculation helps avoid paying too much on your premium. 

When deciding on the best renters insurance policy for your needs, you may see either a “cash value” (CV) policy or a “replacement-cost value” (RCV) one. What’s the difference? 

Cash value vs. replacement cost value

A cash value policy reimburses you for what your damaged items are worth today. So, a CV policy takes into account depreciation. You won’t get the full cost of what you paid for the damaged, stolen, or destroyed items. 

Generally, a cash value policy has the lowest premiums. 

A replacement cost value is more expensive but will replace the damaged items with similar ones. This means you will get back the same amount as what you paid for. 

Deductible

The deductible is the amount you have to pay out-of-pocket before your insurance company pays you any money. Deciding on a higher deductible is one way that you can lower your premiums. However, you should prepare to pay the deductible if you need to make a claim. 

Some renters keep the amount of their deductible in a savings account. This way, they can choose lower premiums without the worry of replacing damaged items. If they never have to make a claim, they have saved money on their renter’s insurance, and they have a nice savings pot in the bank. 

For details about claim reimbursement, read the policy carefully. It is essential to know precisely what the policy includes and what it doesn’t. 

Renters Insurance: A Takeaway Message

In conclusion, renters insurance is worth it to replace any damaged items. You also enjoy protection if someone sues you because they injure themselves on your property.

If you are still unsure if you can afford renters insurance, you can shop around to compare premiums. Choose the appropriate coverage, so you don’t overpay for renter’s insurance. You can also adjust your deductible to save money on premiums and look for discounts.