First, the easy bit: renters insurance is a must, even if you think you don’t have a lot of expensive belongings. Take a moment to think about all of your possessions: your furniture, your computer, your phone, even your shoe collection or your sports equipment. Now imagine everything is destroyed. Yowza. Could you afford to replace everything, either right away or at all without debt? The numbers indicate that the answer is most likely no, as the average person has between $20,000 and $30,000 in belongings (yes, the average person, not the wealthy outliers).
What’s troubling is that researchers have found that nearly half of Americans would have trouble coming up with $400 for an emergency and a little fewer than half of Americans couldn’t come up with $2,000 in 30 days without selling possessions or taking a predatory loan. A basic renters insurance policy can have your back in these cases, and a policy from a national insurance company often costs between $15 and $20 per month. You barely have to do math to see the obvious value of renters insurance.
The Benefits of Renters Insurance
Renters insurance covers your belongings no matter who owns the home or apartment in which you live. It also covers your belongings wherever you travel (usually up to a certain limit unless you itemize – and pay extra for – certain items, like an engagement ring) and it can even cover belongings stolen from you car.
Also, if you put some or all of your belongings into storage, they will most likely be covered, to an extent, though you may need to add coverage for damage due to mold, flooding, or other types of damage. (Call your renters insurance agent before stashing your stuff in a storage unit and ask specifically about coverage limits and exclusions.)
Renters insurance will also kick in in the event that someone is injured on your property or by you and they sue you for damages.
(See Your Renters Insurance Checklist: 5 Things You Need to Know for more)
Do You Have to Have Your Own Renters Insurance Policy?
No doubt renters insurance provides protection. But assuming you’ve decided you want it (or need it – many landlords will require that you have it), you might wonder whether or not you can share it with a roommate or roommates. After all, you live together, and likely have many shared expenses and even shared risks. But is sharing renters insurance with a roommate (or boyfriend or girlfriend) actually financially smart?
Before you lump renters insurance into all the other bills you and your roommate(s) split, like internet and electric or even groceries, it’s important to understand that renters insurance isn’t just another utility. As always, you’ll have to consider your own personal circumstances, but here’s a little help making the choice:
Cons of Sharing Renters Insurance
Not all of the following will apply to every pair or group of roommates, and different insurers have different rules and requirements, but for most renters insurance scenarios, consider the following:
- Often the difference in price between splitting a policy and each carrying your own isn’t that significant. On your own, you might carry a $10,000 policy limit, but if you want both your and your roomie’s belongings covered, you’d have to raise the limit. So, either you can both pay for a $20,000 joint policy or you can each pay for a $10,000 individual policy. The best thing to do is to get quotes from several different insurers for both options and compare.
- Consider liability. Renters insurance doesn’t just cover your stuff; it covers physical injuries that happen in your home or as a result of property you own, too, including pets. Say your roommate throws a raging party and someone drives home drunk, causes damage, and your roommate gets sued. Or say your roommate’s dog bites someone on the street and gets sued. If you’re on the same insurance policy, your rating will be negatively affected, too.
- If you have more than one roommate and any of you plans to move out on staggered schedules, it’s better to have your own policy. And in some cases, you might have to, as many insurers only allow two unrelated people to be on one renters insurance policy. You’ll also need written permission to remove anyone’s name from the policy.
- The higher the monetary value of your assets, the higher your renters insurance policy will be, so if one of you has belongings worth significantly more than the other, splitting the bill 50-50 won’t be fair. For example, if you have to make a claim (say, smoke or water damage ruins everything), the payout will be in both of your names, and you’ll both be entitled to half; but if you’re the one with more valuable assets, you might not have everything covered.
Pros of Sharing Renters Insurance
The biggest pro of sharing your renters insurance policy is splitting the monthly bill. And, truth be told, there aren’t any other benefits of sharing a renters insurance policy.
Still, if you and your roommate meet a particular profile, sharing could be a good option. If you have equal shares of your assets (one of you doesn’t own three $10,000 rugs while the other still has a flip phone) and you both commit to staying in the apartment through the policy term (or draw up a contract for how the policy will be paid in the event one of you leaves early), a shared policy could work for you. But before you commit, make sure you and your roommate are on excellent terms and consider the potential downsides noted above.
Renter’s Insurance and Romantic Partners
If you co-habitate with a romantic partner and are unmarried or not in an official domestic partnership, consider either adding both of your names to the same policy or each having separate policies.
If you and your partner do neither, the person with his or her name on the policy could legally walk away with the entire claim payout, even if half of the other person’s belongings were in the home.
Sharing: Yay or Nay?
For the sake of building your insurance history, we’d recommend not to share. For example, if your roommate makes even a simple claim for theft, it’ll go on your insurance history and might make any policies you purchase later more expensive because, just as making a claim with auto insurance raises your rates, the same is true of renters insurance. It’s important for each of you to build and maintain your own separate insurance histories.
The final decision to share a renters insurance policy comes down to trust. Do you trust each other’s commitment to the living situation? Do you trust each other’s integrity?
Even if you aren’t romantically involved, sharing is serious business, so be sure you consider your options carefully.
If you trust your roommate and do decide to share a renters insurance policy, you’ll need to find out if you have an equal share of assets. Call several different insurance agencies and ask for rates both for you and your roommate individually and for combined policies.
And don’t forget to ask about discounts for additional home safety devices (like smoke detectors and alarms) and bundling your auto insurance policy. (But note that auto insurance and roommates works differently and it’s actually very important you add each other as drivers to your separate policies.)