Why You Need Renter’s Insurance

Most of my friends who rent don’t have renter’s insurance, for one of three mistaken reasons:

  • They think it’s too expensive
  • They think their landlord’s policy covers them
  • They think their stuff isn’t worth much.

If you rent, then you do need a renter’s policy. It’s actually very affordable – it’s usually less than $20 a month. $12 a month is the national average. I pay $20 where I live in California, and that buys me $20,000 in coverage with a $500 deductible.

What Renter’s Insurance Covers

Rather than the structure, renter’s insurance covers your possessions. Your landlord’s policy will only cover the structural damage. If your stuff is ruined due to a leaking pipe or collapsed ceiling, you might be able to sue your landlord, but a renter’s policy will cover you with less hassle.

In most cases, insurance policies protect your personal property from loss due to fire, theft, vandalism, water, and other similar damage. Most policies also cover a limited amount of liability if you injure someone or if they’re injured in your rental property.

Some policies will also cover theft of your property when you’re away from home. For example, if you’re traveling and your suitcase is stolen, your renter’s policy may cover the loss of your clothes.

What Renter’s Insurance Doesn’t Cover

Renter’s insurance, like homeowners insurance, doesn’t cover everything. If you live in a flood zone or earthquake country, you may need a supplemental policy. My insurance agent recommends against earthquake insurance for renters because the deductibles are high and the coverage is low. It’s mainly designed for structural damage incurred by owners.

Most policies offer only limited coverage for the following items. If you have any of these, you should ask about a special rider to cover them:

  • Cash
  • Business equipment
  • Jewelry
  • Furs
  • Firearms

How Much Coverage You Need

The level of coverage you need depends on the value of your personal property and the cost of replacing it. The more stuff you have, the more you’ll need to cover. State Farm has a handy estimator as part of their quote tool.

According to their tool, I would need a policy worth $40,000 to cover the entire contents of my 4.5 room apartment in a total loss (that’s two bedrooms, a living room, and a kitchen with dining room.) My policy is only $20,000, but I didn’t factor in replacing all of our books, CDs, and DVDs. I estimate that it would cost right around $20,000 to replace the following items if we shopped carefully:

  • Clothing
  • Bedroom furniture
  • Linens
  • Personal care items
  • Luggage
  • Computers
  • Entertainment center
  • Desks
  • Living room furniture
  • Dining room furniture
  • Cookware
  • Dinnerware
  • Flatware
  • Glassware.

To determine how much you need, write an inventory of your home or apartment, along with the current value or replacement cost of the items you could/would replace. As I said, I wouldn’t replace all of my books or CDs, just some of them. I’d look at this as a chance to get only what I really needed, rather than to replace the odd collection of kitchen utensils I’ve amassed over the years.

After you’ve completed your inventory, put the list and photos or a video of your belongings in a safe place off the property. I don’t have a safe deposit box (it’s been on my “to do” list for a year now), so I gave them to my parents and they gave me theirs.

How to Buy a Policy

If you have auto insurance, contact your insurance company to see if they offer renter’s insurance. If you can combine your policies, you’ll probably get a discount on both. If your insurer doesn’t offer it, then go online to find it at a site like NetQuote, which offers competitive renter’s insurance quotes. You may need to contact an insurance agent. When I bought my policy, State Farm was the only company offering it, but there are now numerous companies offering policies.

Compare quotes from a few different companies and check them out with the state insurance commission. You should also compare the levels of coverage they each offer. Most will offer actual value coverage, but spend a little extra to get replacement value coverage if it’s available.

Unlike my auto policy, I’ve never had to tap my renter’s insurance policy, but I’m glad I have it every time I turn on the news and see an apartment building engulfed in flames. Don’t be so cheap that you avoid insurance to save $20 a month. Anything can happen. If you’re not insured, Murphy’s Law guarantees it will.

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