Renters insurance comes in handy when the unexpected happens. From a house fire to a break-in, it’s important to know that your personal items are covered when it matters most. What’s more, covering your potential liability is equally as crucial. If you’re sued because of negligence or something completely out of your control, like a party guest breaking an ankle in your driveway, renters insurance can be your saving grace. Many insurance companies offer substantial coverage at an affordable rate, but there are still several things to consider before starting a policy. As a licensed insurance agent, I’ll share answers to five common – yet critical – questions about renters insurance. Your renters insurance checklist:
1. Who needs renters insurance?
Most landlords require proof of insurance before a new tenant moves into a home or apartment; making renters insurance a foregone conclusion in most cases. Since you aren’t buying the place you’re moving into, the property owner wants to make sure that you will be able to pay for any damage that may occur while you’re occupying their space. A wild party or overflowing sink can cause significant damage to a structure, which can lead to astronomical repair bills that most renters just can’t cover out of their own pockets. Requiring renters insurance is the easiest way for a property owner or landlord to ensure that their investment is covered if the tenant causes major damage during the lease. This means that the tenant’s liability is covered, as well.
Even if you find yourself in a living situation that does not require renters insurance, maintaining coverage is still a good idea. If you are a dog owner, for example, your furry family member can open you up to a significant risk of a lawsuit if they were to bite someone. The truth is that all dogs bite, no matter how docile, and this fact alone is a prime reason to cover your liability. The same can be said for children, who are your responsibility wherever they may go until they become adults. When you begin to realize how much exposure you face on a daily basis, it’s not difficult to comprehend the value of protecting yourself against a lawsuit.
2. Are all renters insurance policies the same?
Nope. Outside of liability, it’s also important to cover the items you’ve spent hard-earned money on to fill your home. If you were to lose everything in a fire, would you be able to replace all of your personal property out of pocket? The answer for most people is a definitive “no.”
While renters insurance does provide coverage for personal property, it’s important to understand how you would be compensated in the event of a claim. You choose the amount of personal property coverage on your policy so you need to have an understanding of how much money would be required to replace your belongings in the event they are damaged or stolen.
Renters policies cover personal items in one of two ways: actual cash value (ACV) or replacement cost.
- Replacement cost coverage means that your policy would pay to replace your items (like a camera) with a new, comparable version.
- Actual cash value takes depreciation into account so the amount you receive in the event of a claim depends on the age or condition of the item (the same way your car insurance company would value your vehicle in the event of a total loss).
The main thing that consumers need to understand about the two valuation types is that replacement cost policies generally cover your items at a higher amount than one that uses ACV. The premium for a replacement cost policy is a bit more expensive, however, so it’s important to consider how much it would take to replace your personal items before you decide which option is right for you.
3. Should you make an inventory of your personal items?
Renters insurance allows the flexibility for you to choose the amount of coverage for your personal property. In the event of a claim, though, you will have a much easier time getting compensated for the things you lost by having an inventory of your belongings.
Without proof of exactly what you had before incurring a loss, your insurance company may not agree to cover all of your personal property.
What’s the best way to inventory your property?
I recommend a multi-faceted approach. It is impractical to save every receipt for every purchase you make; storing receipts can be cumbersome and there is a risk that they could be lost in the event of a fire.
A simple fix would be to snap a picture of your receipts and save them to a Google Drive or Dropbox. This also allows you to access those receipts from any device with internet access even if the original is rendered unusable. And for items which you no longer posses a receipt, taking a video of your belongings makes them easily identifiable. It’s also a good idea to update the video or pictures of receipts and personal items as you add them.
4. What other coverage does renters insurance include?
Medical coverage is offered on most renters policies to pay for injuries that a guest may suffer at your residence.
Imagine your friend trips on your lawn during your backyard BBQ and breaks his leg. Ideally, your guest won’t want to file a lawsuit against you, but he probably doesn’t want to pay for expensive emergency room bills either.
Fortunately, the medical coverage on your policy will normally pay for those costs as long as this person isn’t a member of the household. This can help your friend avoid having to pay the deductible on his medical insurance and also help you avoid a potential lawsuit.
Loss of use
One last coverage that renters policies offer, and one of the most important in my opinion, is loss of use. Also referred to as “additional living expense” coverage, loss of use is intended pay for expenses that arise when you aren’t able to stay in your home or apartment after a covered loss.
If you suffer a fire or a break-in, you may not be able to stay at your residence until repairs are made. Loss of use coverage pays for things like hotel stays and even food expenses if your place becomes unlivable due to a covered loss. This coverage can vary by provider so it’s a good idea to account for an extended stay when determining how much coverage is right for you.
5. What makes renters insurance more or less expensive?
- A cap on certain categories of personal items: While your belongings are generally covered by renters insurance, it’s important to note that certain pricier items, like jewelry, golf clubs, or other collectibles, have a cap on the amount you can claim after a loss. If you own high-dollar items, it’s a good idea to ask your agent about how this policy would protect those things if you file a claim.
- Sharing a policy with a roommate: Sharing a policy might split coverage in half, but you should consider having each renter living in the same residence maintain his or her own policy to avoid a decrease in coverage limits. This is especially true if you have some of your own expensive items to cover as previously mentioned.
- Your deductible: Just like with car insurance, a personal property claim is subject to a deductible. While a higher deductible will result in lower rates, the difference in premium is often not significant and you need to make sure you can easily afford to pay it if you have to file a claim.
- Your dog: However unjust this may seem, insurance companies do discriminate against certain dog breeds because of the potential liability exposure. It’s a good idea to mention the breed of your dog(s) to your agent so they can quickly let you know whether or not they can insure you with a specific company. Lying about the breed of your pet simply to procure coverage can lead to a denial of a claim, especially if your dog is involved.
First and foremost in your renters insurance checklist is the answer to whether or not you should have it, and the answer (whether you’re required to carry it or not) is a resounding “yes.” The potential benefits far outweigh the costs, and the peace of mind alone can make the cost of the policy worth it.
Not all renters policies are the same so it’s important to ask the agent providing a renters insurance quote as many questions as necessary to make an informed decision. The worst time to find out that you aren’t covered is after something serious has happened.
And as always, shopping with as many companies as possible will result in the best coverage at the best rate.