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While millions of Americans rent their living space, a 2018 report by the Insurance Information Institute found that only 46% of current tenants have obtained any sort of renters insurance to protect their belongings from damage, loss or theft.
The issue for most is not affordability (policyholders typically pay no more than $300 per year according to the III) but a lack of information about coverage options for renters. This renters insurance guide will discuss what is and isn’t covered by a renters insurance policy, the best renters insurance options,how to obtain renters coverage and a few money-saving tips to help keep your premiums as low as possible.
What to know when buying renters insurance
Know what type of coverage you want
There are several types of renters insurance coverage that you can buy.
- Personal property insurance: This covers your belongings if they are stolen or destroyed. It includes items such as clothing, electronics and furniture.
- Liability insurance: This protects you if you damage someone else’s possessions or if a guest is injured on your property. Your insurance company will cover the damages and medical expenses.
- Additional living expenses (ALE) insurance: If something happens to your home that prevents you from living there, your insurance company will pay for temporary living expenses, such as a hotel.
Some providers also have add-on coverage you can add to your policy. These policies can add extra protection for expensive items like jewelry, musical instruments, photography equipment or electronics. Some companies also have coverage you can add to your policy that don’t affect your apartment but can be good to have such as identity theft protection or pet insurance.
All renters insurance companies should offer personal property, liability, and additional living expenses. If you’re looking for any add-on options, you’ll need to do some more research into providers and their available coverage.
Create a home inventory
To know how much insurance you need to buy, you first need to know what you need to protect. Create a home inventory of all of your valuable possessions. By itemizing what you own and the value of each item, you can buy the right amount of renters insurance for you. This way, you can avoid paying for more coverage than you need.
Here are some tips for creating your inventory:
- Use your phone’s camera to take pictures of your belongings. This not only helps you organize your list, but it will also help you document the condition of each item.
- Write down the item name and description,where you bought it and for how much. If the item has a serial number, include it.
- Work room by room, only moving on when one entire area is complete. This can help to make an overwhelming task feel more manageable.
Who needs renters insurance?
Today’s American renter comes from all backgrounds, and this is no more evident than in the National Multifamily Housing Council’s 2019 report.
Today, there are 43 million U.S. households that rent. Nearly 49% of renters are under 30 years of age, and 5.2 million of these households belong to single women. Just 16% of seniors 65 years of age and older rent.
Apartments still remain popular, claiming 37% of renters. Twenty-eight percent of renters earn $20,000 or less each year. In comparison, 42% of homeowners make $75,000 or more each year.
As the rental market continues to fluctuate and grow with each passing year, renting remains a reliable way of living for millions of Americans nationwide.
What does renters insurance cover?
Although individual plans will vary in their coverage, renters insurance typically covers damage or property losses the policyholder is not liable for. These losses tend to involve certain weather-related events, human intruders or structural problems.
Many renters incorrectly assume their belongings will be covered under their landlord’s property insurance policy. However, tenants must obtain renters insurance coverage for all belongings kept within their rental unit. The landlord will only be held liable if damages or losses occur as a result of faulty maintenance or structural damage the landlord has failed to address.
Personal property insurance
Renters insurance may cover damage to your belongings from covered problems such as:
- Damage caused by the weight of ice, snow or sleet
- Damage from artificially generated electrical current that is not caused by missing tubes, transistors or other electronic components
- Damage stemming from sprinkler systems, household appliances, faulty plumbing, heating or air-conditioning fixtures
- Falling objects
- Fires, explosions or lightning
- Vandalism, theft, or malicious mischief
- Volcanic eruptions
- Wind or hail storms
Most plans do not account for damages or losses caused by earthquakes, floods or other “catastrophic” weather events. Renters may be able to purchase flood coverage through the National Flood Insurance Program, but get a contents-only option. Your landlord’s insurance should cover damages to the building.
Renters insurance will cover additional living expenses (ALE) when one of the aforementioned events leaves your residence uninhabitable.
Here’s what to keep in mind with ALE concerns:
- These expenses include hotel accommodations, vehicle rentals and meals.
- Most plans will cover these costs at a rate between 30% and 50% of the total policy. Based on that rate, if your renters policy is valued at $200,000, your “additional living expenses” will probably fall between $60,000 and $100,000. Check your insurance documents to see what your provider’s additional living expenses percentages are.
- The insurance provider typically covers these expenses while your property is rebuilt, but in some cases, these expenses will no longer be covered after a year has passed.
Finally, renters insurance provides what is known as liability protection. It covers:
- The costs if an individual is injured at your residence and decides to sue you for medical expenses
- Damages to someone else’s personal property that occur at your residence
- Legal fees and awards to the plaintiff up to a certain amount predetermined by the insurance provider
What is a renters insurance deductible?
Once you choose the type of coverage you want, you can determine your policy’s deductible.
A deductible is the amount of money you’ll be required to pay out-of-pocket until your insurance coverage kicks in. Regardless of the coverage you choose, you will not receive any insurance money until costs related to the claim have surpassed the amount of the deductible. The deductible for most renters falls between $500 and $2,000. The higher the deductible, the lower your monthly premium will be.
A renters insurance policy will only cover your belongings up to a certain amount. For this reason, renters are advised to obtain a floater, or separate insurance policy that covers expensive or luxury items such as jewelry, original artwork, antiques and other expensive pieces of property.
For each possession that warrants a floater policy, you’ll be required to provide a receipt of purchase and, if necessary, a certification of recent appraisal. The figures you submit will determine both the monthly premium you’ll pay for the floater policy and the payout you’ll receive if a claim is filed for the item. Floaters can also be called rider or endorsement policies.
What types of renters coverage are available?
Actual cash value
Renters insurance policies offer one of two types of coverage. Actual cash value (ACV) awards beneficiaries with a monetary amount that reflects the value of your items and property before loss, damage or theft.
The majority of providers offer plans with ACV coverage, and this option typically charges lower premiums. Because actual cost value reflects depreciation, it may not be the best fit for older items. Actual cost value likely won’t cover the total cost of repair. On the other hand, it is typically more affordable, so it’s popular for those on a budget.
- Low premiums
- Good for newer items
- Can be more expensive for older possessions
- High out-of-pocket expenses
Replacement cost coverage awards the beneficiary an amount that will cover the costs of purchasing new items.
Premiums for replacement cost coverage tend to be higher. Still, beneficiaries stand to earn a larger payout for their belongings than policyholders who have ACV coverage, and people who need to file a claim will have less out-of-pocket expenses to replace their items
- Full replacement without depreciation
- Accurately values your property
- Generally more expensive
- Requires a lot of documentation before claim approval
How much does renters insurance cost?
The biggest concern for renters about insurance is generally, “How much is renters insurance?” The Insurance Information Institute reports the average renters insurance in 2017 was $180, down 2.7% from the previous year’s rate of $185.
The exact cost of renters insurance depends on many factors, like where you live. III found North Dakota the cheapest at an average rate of $120, compared to $258 in Mississippi, the most expensive state for renters insurance.
Other factors that impact the cost of your insurance include the value of your belongings, the amount of coverage you choose, any additional coverage options you have and the cost of your deductible. The higher your deductible, the lower your monthly payment will be.
Money-saving tips and finding a provider
Like homeowners insurance, renters insurance often reflects the perceived safety and risk associated with one’s residence.
By installing features in your rental unit that help protect against damage or theft, you could potentially reduce your premium by a considerable amount. Features that stand to save you money on renters insurance include fire extinguishers and smoke detectors, sprinkler systems, anti-theft alarms and deadbolt locks.Notify your landlord or property manager before installing any additional safety features in your rental unit.
You can also save money by bundling your renters coverage with your auto insurance plan. Providers like Allstate and Hartford state that by combining renters with auto, you can save between 20% and 35% on renters specifically. This option is only available to individuals who seek renters and auto coverage from the same provider.
Just as some factors can cause the price to decrease, there are some things that can increase the price of your renters insurance.
- Households with certain dog breeds, such as pit bulls and German shepherds, may pay more due to the perceived aggressiveness of these animals.
- Renters who smoke indoors also face higher premiums due to the large number of rental property fires caused by cigarettes. Smoking accounts for 11.8% of fatal fires and 6.3% of fires resulting in injury.
How and when you pay your premiums will also make a difference in the overall amount you spend on renters insurance. Policyholders who pay an annual premium save money by avoiding certain fees and added charges often tacked on to monthly premiums. If you pay monthly, consider opting for a payment plan that automatically draws funds out of your bank account or credit card. Some providers will offer a discount for these policies while others require auto-draft payments.
Finally, policyholders need to limit the number of renters insurance claims they file. Every time you file a claim, your provider will likely increase your premium. Like any other type of insurance, the key to keeping your premium low is only filing a claim when it’s necessary.
Is renters insurance worth it?
Renters insurance is not required in many states, but the truth is that just one bad storm could cost you dearly, destroying your most valued belongings and leaving you with no means to rebuild.
Renters insurance is a small investment at under $20 a month in many places. It will protect you when your landlord cannot or will not, and it can restore your bank account in a matter of moments rather than the years it could take you to raise the money to replace damaged belongings on your own.
You never know when an emergency will strike. Renters insurance ensures you won’t have to go through it alone.
How to file a renters insurance claim
However, the true test of your relationship with your insurance agent will come if and when you decide to file a claim. File renters insurance claims as quickly as possible; expediency ensures that the insurance company can quickly make lodging arrangements for your family if necessary and reimburse you for anything that needs to be replaced.
Renters who wish to file a claim will need to provide their policy number and home address to their insurance company.
Additionally, your insurance company may ask the following:
- What is the time and date when the damages occurred?
- How did the damages happen?
- What was the cause of the occurrence?
- What kind of damage did your property experience?
- What is the estimated amount of total damages and losses?
If the claim stems from vandalism or theft, you’ll also be required to submit a police report and send your provider an official copy. Once you’ve sent in the policy report, you may submit receipts, invoices and other documents from your inventory to the insurance provider.
Those documents will establish the value of all destroyed property and increase your chances of receiving a fair payout. Any photographs of your property prior to the event will also help your insurance company calculate the amount of total damage.
Policyholders who maintain a thorough inventory, file insurance claims in a timely manner and provide detailed information to their carrier are much more likely to receive a fair payout from their policy.