Insurance Insurance Basics

The ABC’s of Renter’s Insurance and Why You Need It

Written by Frank Addessi

In between graduating high school and buying your first home, you are going to be somebody’s tenant. And you’ll probably want renter’s insurance.

According to the Census Bureau almost two-thirds of adults under 30 rent rather than own. Renting has a lot of advantages, especially for young people who have limited income.

Renters generally don’t have to pay for maintenance or property taxes. When something goes wrong, you call the landlord and it gets fixed. In fact other than your utilities your only household expenses beyond rent and food are utilities.

Why do I need renter’s insurance?

The number one reason people give for not having renters insurance is that they believe they are covered by their landlord’s insurance. Nothing could be further from the truth. Your landlord’s insurance protects what belongs to your landlord.

Think of your rental as a box that you keep your things in. The stuff inside the box is yours and the box belongs to your landlord. If the box gets damaged the landlord is responsible for getting it fixed. But if the stuff inside the box gets damaged or stolen that’s your problem.

If a burglar kicks in your front door and leaves with your most valuable possessions, your landlord’s only responsibility is to repair your front door. If a storm damages the roof of your rental and rain water leaks in destroying your large flat screen television and $2,500 sofa, your landlord is only required to repair the roof and ceiling. Any damage that occurred to your things even as a result of a leaky roof is not covered by the building owner’s insurance.

The only time damage to your property is the landlord’s responsibility is if the damage is the result of the landlord’s failure to do proper maintenance.

How does renter’s insurance work?

Each insurance company determines its own standards for coverage. However, generally speaking, they all cover the following:

Personal property — It will help cover the cost of your personal belongings that are stolen or damaged as the result of a covered incident. That means if your computer and television are stolen during a break-in you’re covered. If your television is damaged because the tenant above you flooded their bathroom and the water leaked into your apartment, you are insured.

However, if your computer dies because you spilled a glass of water on it you are not insured. A big plus of renter’s insurance is that your stuff is protected against theft when you are away from home.

Personal liability — This protects you if someone is injured in your rental apartment or house. For example, if your friend trips on your bathroom rug and breaks an arm, your renter’s policy will pay the medical expenses. If you trip over your cat and fall into a guest and they are hurt, your insurance will pay for their medical bills and defend you if you are sued.

You are not protected against your own injuries. The limits for this type of coverage can vary greatly from one policy to another so be sure to ask.

Property damage — This coverage protects you at home and away from home if you damage someone else’s property.

Living expenses — If you can’t live in your rental because of a covered incident your renter’s insurance policy may pay a portion of your expenses to temporarily live somewhere else while repairs are being made.

What’s not covered — Most renter’s insurance policies have exclusions which usually include things like jewelry, art and collectibles. Excluded items can be covered by adding a rider or endorsement to the policy for an additional premium.

Limits — Renter’s insurance policies have limits which govern how much they will pay per incident and sometimes per type of item. An important part of shopping for renter’s insurance is understanding the limits of the policy and making adjustments based on your needs.

Common renter’s insurance questions

Q. What happens if I move?
A. Notify the insurance company of your new address and your policy will move along with you.

Q. Is my roommate covered under my policy?
A. Usually not. Unless you are married or otherwise related to your roommate you should each have your own policies.

Q. Can I pay for my policy monthly?
A. In most cases, yes, but it depends on your insurance company.

Q. How much does it cost?
A. Renter’s insurance usually runs between $150 and $350 per year, depending upon where you live and the coverage limits of your policy.

About the author

Frank Addessi

Frank Addessi has been a serial entrepreneur and a licensed insurance agent for more than 20 years. He writes primarily about personal finance, small business and all types of insurance. His work has appeared on websites such as Smart Asset and The Simple Dollar. He can be found on his website frankaddessi.com.

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