Renter’s Insurance – What, Who, and Why?

Car insurance, boat insurance, life insurance: for every worry in life, there seems to be a way to insure it. On the other hand, renters insurance is a useful alternative for those who don’t own a home or boat but want to ensure that their valuables and living space receive similar protections. In 2020, only about 57% of U.S. renters had some form of insurance, compared to about 85% of landlords. With that in mind, the RentHop team has compiled a list of pros and cons, tips for any renter considering insuring their valuables, and the best ways to avoid overpaying!

What is tenant insurance?

Renters insurance is a policy that covers a renter’s personal or financial valuables in the event of loss or damage. While generally, home insurance can cover damage to the home itself, such as roof leaks, fences, and air conditioning units, renters insurance is generally more focused on personal property, personal liability and loss of use. Renter’s insurance typically covers personal property: electronics, clothing, furniture, sports equipment, and other appliances. Jewelry and collectibles depend on the policy. One important thing to note is that renters insurance often covers these items at home and when you are away; meaning that if your insured tablet computer is stolen from your car while you are away from home, coverage would still be active. The flexibility and range of tenant insurance makes it a great option for a variety of living situations, from single-family studios to co-ops and other congregate living situations.

Who needs tenant insurance?

Although renter’s insurance is not required by law in most situations, landlords may require a tenant to purchase tenant insurance before or shortly after signing a new lease. Even when not mandatory, tenants insurance is generally recommended for all tenants, as the landlord’s insurance policy almost always only covers the building itself, not your belongings, leaving any tenant not insured without luck in the event of theft, disaster or otherwise. emergency room. Notably, most policies cover named perils (or covered perils), a specific set of situations and conditions under which a policy would pay out. Often, specific situations such as earthquakes and floods are not covered by the named perils and must be purchased separately or as an add-on policy. Tenants who live in areas with a high risk of flooding or other unnamed perils should seek out these extended policies as part of their renter’s insurance.

Other reasons to take out tenant insurance?

Personal responsibility

In addition to protecting your valuables from damage or theft, many renters insurance policies include protections for personal liability and loss of use. Personal liability is an important facet of renters insurance, as it protects the renter in certain cases in the event of harm to a guest while they are on or near their property. For example, if a guest were to be injured while in your apartment, a liability insurance policy could help cover medical bills or any other expenses caused by the accident if you are legally liable. Not all policies include a personal liability clause, so consider your benefits carefully if you’re interested in having one.

It’s relatively cheap

Renter’s insurance can usually be purchased in dollars per day, with most policies ranging between $14 and $22 per month, depending on coverage. In 2018, national premiums ranged from $126 in North Dakota to $252 per year in Mississippi. Comparatively, depending on where you live, home insurance in 2022 can cost anywhere from $780 to just under $3,400 per month! Some new renters insurance policies start as low as $5 per month. However, at these prices, you are unlikely to have all the benefits and liabilities covered by traditional renters insurance.

Loss of use

Loss of use, also known as Cover D, is a cover that reimburses tenants in the event that their accommodation becomes uninhabitable for any reason. Barring a natural disaster, many seemingly small issues could make a uninhabitable living space, such as certain types of mold, widespread leaks, or infestation. Loss of use insurance would protect against covered perils and help cover expenses if you need to move temporarily. It is important to note that flooding is specifically not covered by most loss of use policies and is rarely a named or covered peril. However, this is not the case for tornadoes or fires, which are more likely to be covered. It is important to be clear about the named perils that are specifically covered under your cover for loss of use when considering a policy.

What risks are covered?

Renter’s insurance policies are very specific in the types of events covered, and only those listed will give rise to payment if they occur. These situations are called named perils or covered perils. Most tenants’ insurance covers damage caused by fire, theft, wind, hail, frozen pipes, vandalism, explosions and falling objects. Some policies also cover on-premises storage units, although this is not typical. These named responsibilities are broad and not limited to stand-alone incidents. For example, your tenant’s insurance will cover a fire that starts in another unit and causes damage to yours, either through smoke damage, fire or water damage from sprinklers, provided it is a specifically named risk.

Why is flooding not covered by renter’s insurance?

Typical insurance policies do not cover flood damage for a variety of reasons. Floods can often be catastrophic disasters which lead to very expensive claims that many insurance companies are unwilling to pay for the cost of a basic policy. Just one inch of flood water can cause up to $25,000 in damage alone! If, for example, you are a renter whose home is in a high-risk area according to the Federal Emergency Management Agency’s (FEMA) flood-prone area search, you qualify for a special program that allows renters to include flood insurance as part of their policies. These tenants have access to the National Flood Insurance Program (NFIP), which is made available by FEMA and is backed by a network of more than 50 insurance companies.

What else is not covered by the renter’s insurance?

Although renter’s insurance is ideal for covering most of your belongings as a renter, some special cases are not included in some policies. For high-end electronic equipment, fine jewelry, musical instruments, and some antiques and collectibles, some rental policies required the purchase of floating insurance in the form of an endorsement. A rider is essentially an add-on to a policy, while floater insurance covers items and equipment that are moved from place to place often or easily. For musicians, athletes, and others who haul expensive gear from place to place, it can be helpful to purchase floater insurance to make sure you’ve covered all your bases.

Also, damage caused by pets is not always covered by the renter’s insurance, although some policies include endorsements for additional coverage. Damage caused by your pet to a guest or to a guest’s property may be covered by liability insurance. However, your property often does not benefit from the same protections. This is where pet insurance comes in, as most policies not only cover illness, injury, and emergencies, but renter’s pet insurance can also cover property damage. caused by the animals in question. Note that renter’s pet insurance is more specialized than standard pet insurance. Your covered responsibilities should be carefully considered before purchase if you plan to bring a furry companion with you.

What should I do before taking out tenant insurance?

As with everything, not all renters insurance policies are built equally, and there are some important questions one should ask when considering their coverage. The average person has more than $35,000 of personal effects that are probably not covered by a homeowner’s policy, so it’s worth taking the time to add up what you have to see what coverage you should be looking for. Most importantly, take inventory: The main component of renter’s insurance is personal property coverage, so it’s important to know the value of the personal property you want to cover. Taking an inventory of the home, starting with expensive items and going through all of your belongings, is a good way to estimate the value of your covered items. Be sure to take photos and note the value of each item as you go. With this information, you can choose the policy and deductible that’s right for you.

Being a tenant can be expensive, especially when the unexpected happens and expenses come up. With anxiety and stress rising across America, acquiring it can be one of your best tools for gaining autonomy over the things you hold dear. Renters insurance is a smart, cost-effective way to keep your belongings safe, and it’s flexible enough to cover any living situation, providing peace of mind and security for dollars a month.