Inside: Did you know your landlord’s insurance won’t cover your possessions? Find out how renters insurance will help protect your savings from property loss.
People that own homes tend to accumulate a lot of stuff, so it makes sense to have homeowner’s insurance. And it is required if you have a mortgage. But do renters need to worry about insurance? What about students in dorms?
I hadn’t heard about renters insurance when I moved out of my parents’ home, but either through dad or friends (I don’t remember which), I learned about it and found it very affordable.
Renters insurance is like homeowners insurance for renters. The insurance protects your belongings and not the building. The landlord/building owner should have insurance to cover the building, but their insurance WILL NOT cover your personal property. Because renters insurance doesn’t cover the building, it is very affordable.
Reasons People Don’t Bother to Get Renters Insurance
I don’t own enough stuff to need insurance
Are you sure? Take a walk through the rooms, opening drawers and closets, and take an inventory of your items. Everything. Clothes, bedding, furniture, utensils, etc. How much would it cost to replace all of that?
My belongings aren’t worth much
Renters insurance can also cover damage to other tenant’s property. What if your tub overflows and damages the apartment below you? Your insurance would cover that damage. Your friend trips over a rug and breaks an arm, then wants you to pay for it? Renters insurance could cover that. Building catches fire, so where will you live? It is likely that the landlord’s policy won’t cover costs for you to live elsewhere. But know what would? Yep. Your renters insurance coverage can step in and help pay the rent elsewhere.
Jewelry and Electronics
Awesome. So the insurance will cover all my fancy bling, right? Mmmm, not quite. There are limits of coverage for cash, jewelry and electronics, so for those you will want to speak with the insurance agent and possible get a floater for additional coverage on jewelry and electronics (sorry, not cash).
Related post: Do You Need Life Insurance If You Are Single?
Types of Coverage
Convinced yet? Before you go shopping for plans, know that there are two types of renters insurance
Actual Cash Value
This type of plan pays to replace your possessions minus a deduction for depreciation up to the limit of your policy.
Example: you bought a new mattress for $800 5 years ago. It might be worth $50 today so insurance would kick in $50 towards replacing that mattress.
This type of plan pays the actual cost of replacing your possessions (no deduction for depreciation) up to the limit of your policy. The $800 mattress could be replaced with a like item and no deduction would be taken for years of use.
Obviously, insurance with replacement cost coverage is the better. Because the coverage is better, it does cost a bit more. Ask the representative for quotes for both types of coverage and you may be surprised at how affordable even replacement cost coverage is.
If you are renting, for the price of takeout once a month (about $200/year), your possessions would be insured with renters insurance.