Do You Need Renters Insurance?

Mayra ParisDec 18, 2017

Your neighbor forgets to turn off the stove before going to work, his kitchen curtains catch fire, it spreads, and one of the walls of your apartment is damaged, forcing you to move out for a few weeks while your landlord fixes it.

Your dog escapes into your neighbor’s yard and chews through her fence. Furious, she decides to sue you for the damages.

You leave your car parked in front of your friend’s house, and someone breaks into it and steals your camera. It will cost you hundreds of dollars to replace it.

What do these scenarios have in common?

They are all covered by renters insurance.

What is renters insurance?

Renters insurance covers tenants in case of incidents such as fire, theft, and lightning. If your personal property is damaged, the insurance will pay out to replace the items lost. If your rented home or apartment is destroyed, it will also cover your additional living expenses while your home is repaired. Additionally, most policies also include personal liability coverage, which protects you if another person is either hurt or their property is damaged while in your home or due to your actions—or your dog’s.

Some things aren’t covered under most renters insurance policies, such as damage caused by floods, hurricanes, and earthquakes. However, it is possible to include riders in your policy to cover these extreme weather events.

Many renters believe the landlord’s homeowners insurance policy will cover these losses, but that's simply not true. Homeowners insurance only covers the owner of the property and damages to the structure. It is the tenants' responsibility to protect their own personal property, which is why it's a bit of a mystery that only an approximate 41 percent of renters have renters insurance.

But do you really need it? Below, we discuss three reasons why a renters insurance policy may be right for you.

Some landlords require renters insurance

When a person takes out a mortgage to buy a house, the lender usually requires that they purchase a homeowners insurance policy. Since renting a house or an apartment doesn’t usually require the same financing as a mortgage, renters insurance isn't required by most landlords.

'Most' is the keyword here. The fact remains that some landlords do require renters insurance, and it’s becoming more and more popular to include it in lease agreements. Renters insurance protects tenants from mishaps like accidental fires and a guest’s slip-and-fall, and it protects landlords from the same risks.

Check your lease agreement to find out if your landlord requires their tenants to have a renters insurance policy. Not meeting this requirement could make you responsible for any damages if the worst comes to pass, and it could even void your lease agreement.

Consider the value of your personal property

One of the most popular reasons people buy renters insurance is because it covers your personal property in case a covered event causes you to lose your belongings. If a power surge fries your computer, you could get a check to replace it. Even if your stuff isn't at home when the event happens, your renters insurance policy may cover you.

There are some limits on how much the insurance company will pay out for certain items, like jewelry and electronics, but there are riders available to cover these types of goods if their value exceeds the insurer’s limits.

You should set a coverage limit that will cover the expense of replacing your belongings if you can’t afford to do so out of your own pocket. This is the maximum amount the insurance company will pay out to replace your property. For example, if the value of your lost items totals $10,000, but your coverage limit is $5,000, you will only receive $5,000 from the insurance company. A higher coverage limit means your monthly premium will be higher. However, if the limit falls short of the cost of your items, you could end up paying for the remainder yourself.

The policy deductible, which is the minimum amount you must pay out of your own pocket before the insurance kicks in, is also important. For example, if you need to replace your $800 couch, and your deductible is $500, you will only receive $300 from the insurance company. A lower deductible will also mean a higher monthly premium, but a high deductible might mean you won’t be able to afford replacing your items at all if their value falls under the target.

Prepare an inventory of your belongings to help you decide what your coverage limit and deductible should be. This inventory will also come in handy if you ever need to file a claim and are required to provide evidence of the value of your property.

How much liability should you be covered for?

Another reason to select renters insurance is the liability coverage most policies include. This coverage is activated when someone who isn’t you or related to you is hurt in your house or their property is damaged, and you are found responsible or negligent. Most companies will also include damages caused by your pets.

The person who suffers damages can file a liability claim with your insurance company and receive a payment, up to the coverage limit you set for these purposes, for the expenses they had because of the accident, such as medical bills and lost wages.

If the injured party files a lawsuit against you, the insurance company would cover the legal fees and the award in the case, up to the coverage limit.

This coverage generally does not include damages caused by a car, since this is covered by auto insurance, and damages caused intentionally by you. Some insurance companies also limit the dog breeds that are included in the coverage.

The minimum coverage limit for most policies is $100,000, but you can choose up to several millions of dollars. Of course, the higher the coverage limit is, the higher your monthly premium will be. But think about how much a lawsuit could set you back if the coverage limit is too low.

Is renters insurance worth it?

In a word, yes. While it’s true that no one ever buys insurance hoping they’ll use it, having a policy can still provide considerable peace of mind. We can’t control our neighbors’ actions, much less the weather or other sources of disaster, so having a policy that can come through for us when we need it the most is valuable.

The average cost of renters insurance is between $10 and $20 per month, depending on where you live and how much coverage you select. In any case, renters insurance is one of the most affordable types of policy on the market. When you weigh the pros and cons, you may find that the expense is well worth it.

Check out our top renters insurance companies to find the policy that's right for you.