If you’ve ever rented a home or an apartment, you are familiar with renter’s insurance. For some tenants, obtaining renter’s insurance is an option; for others, it is required by the landlord. Since you’re reading this, I am assuming that you have the option of not obtaining renter’s insurance and you’re wondering whether the benefits of renter’s insurance outweigh the costs. Let’s find out.
What Does Renter’s Insurance Cover?
A lot of renters are under the misconception that the landlord’s home insurance covers their belongings. That is incorrect. If, for example, there is a fire in your home or unit, the landlord’s insurance will cover the structure, but it will not provide protection for your property. This is where renter’s insurance comes in.
In the event that your personal property is damaged or stolen, renter’s insurance has got you covered. Did someone break in and steal your flat screen TV? No worries. It’s covered. Did your upstairs neighbor’s pipe burst, ruining your suede couches? Fret not; renter’s insurance has got your back. Did your house burn down to the ground taking all of your possessions with it? Call up your insurance company, and get ready to file a claim.
Perils are the kinds of events that your renter’s insurance will cover, and most incidents are covered. In fact, unless otherwise noted, the only exclusions to renter’s insurance is damage caused by floods or earthquakes. If you live in an area prone to those natural disasters, you might want to purchase a separate policy for earthquake or flood protection.
Common Renter’s Insurance Terminology
There are two broad categories of renter’s insurance: actual cash value and replacement cost value.
Actual cash value policies mean that your insurance company will cover the current cash value of your items. If someone broke into your home and stole an iPhone 6 that you paid $800 for a few years ago but now it’s only worth $300, you will only receive $300.
With a replacement cost value renter’s insurance policy, your insurance company will cover the cost of repairing or replacing your items at their current price. Remember that suede couch that got ruined by your upstairs neighbor’s busted pipe? A replacement cost value policy will allow you to buy a new one instead of merely giving you current cash value. Though this type of policy has a higher premium, you also get more coverage in the event of an emergency.
As with all types of insurance, your renter’s insurance policy will come with a deductible. A deductible is a dollar amount that you must pay out-of-pocket before your renter’s insurance kicks in.
Like other types of insurance, renter’s insurance also has limits. There is an overall limit which dictates the total amount of money your insurance company is willing to dish out — $100,000 for example. There are also category limits for expensive property such as firearms, jewelry, furs, silverware, and collectibles.
Let’s say that your collection of firearms costs $30,000 but your limit for that category is $20,000. Well, that means that you will be responsible for coming up with that extra $10,000 to replace your stolen or damaged collection. Some policies might allow you to increase category limits, but note that your monthly premium will increase as well.
What isn’t covered by renter’s insurance?
Renter’s insurance covers a lot, but it doesn’t cover everything. As previously mentioned, damage caused by an earthquake or flooding is not covered. Renter’s insurance also doesn’t cover items that you accidentally lost or misplaced. Furthermore, some pet damage is not covered, and several dog breeds are not covered at all. However, note that each policy is different, so take the time to thoroughly read the information before you sign on the line.
So, is renter’s insurance worth it?
In a nutshell, yes. Compared to other types of insurance, renter’s insurance is affordable — only about $20 each month, or $240 a year. Considering the amount of protection provided by renter’s insurance, this is a steal. And even though tenant insurance premiums are already quite low, there are several things you can do to lower the cost of your renter’s insurance.
No one ever thinks that they will be burglarized or that their home will burn to the ground, but it happens all the time, and it’s better to be safe than sorry. Each policy is different and has different benefits and costs, so do your research and see which plan works best for you.
This is a guest post by Darlene Mase. She lives in Newnan, Georgia with her husband and daughter. She is a stay-at-home mom and works as a freelance writer for Zumper.com and other popular sites. During her free time, Darlene enjoys traveling, hiking, camping, cycling, gardening, caving, kayaking, or anything else outdoors.