Fact-checked with HomeInsurance.com
Renting can be the right financial decision for many people, depending on where you live, your work situation and your lifestyle. Even so, only 41% of renters have renters insurance, according to the Rental Housing Journal.
Whether you rent a high-rise apartment downtown, or a sprawling home in the suburbs, you likely have more financial risk than you think. Here are eight ways that having renters insurance saves money in the long run, and protects your finances when you’re a tenant.
1. Renters insurance is inexpensive.
Many renters mistakenly believe that the cost of a renters policy is similar to homeowners insurance. Since renters insurance doesn’t cover the dwelling structure or any outbuildings, it’s much less expensive than home insurance, which generally pays to rebuild the entire residence if needed.
According to the latest data from the Insurance Information Institute, insurance for a typical renter only costs an average of $180 per year nationwide. In contrast, the average homeowners insurance policy cost $1,211.
2. Renters insurance pays for damaged belongings.
A landlord or property management company must insure the physical structure you rent, but that’s where their obligation to you ends. After a natural disaster, your landlord’s coverage helps them repair structural damage to your place. But it doesn’t cover your losses as a tenant.
If your personal belongings get damaged in a fire or storm, it’s your problem. Even if you’re just starting out, your possessions are probably more valuable than you think. Imagine coming home and finding your rental and everything you own destroyed by a fire.
What would it cost to purchase furniture, housewares, artwork, electronics and clothes? An average two-bedroom apartment can easily contain more than $20,000 in personal property.
Renters insurance gives you coverage up to your policy limits for various categories of belongings. You choose the coverage amounts based on the value of what you own. The higher your limits, the more your premium will be.
3. Renters insurance protects you from theft.
It’s terrible to think about having your rental home broken into, but renters insurance covers that as well. Any of your belongings that get vandalized or stolen are covered, up to your policy limits.
4. Renters insurance covers your belongings away from home.
An often-overlooked benefit of renters insurance is that your belongings have off-premises coverage for perils listed in your policy — such as fire and theft — that occur globally. If your laptop is stolen from your car or while you travel, you can claim it up to policy limits.
However, most policies have relatively low caps on off-premises coverage, such as 10% or 20% of your total coverage amount. Be sure to shop for additional coverage limits if you frequently travel with valuable items, such as jewelry and electronics.
5. Renters insurance protects your possessions in storage.
Off-premises renters coverage also extends to items you keep in storage temporarily or for the long term. It also provides protection for when you or a moving company transport your belongings from one place to another. Again, the policy limits may have lower caps for this scenario.
6. Renters insurance protects you if a visitor gets injured.
Getting into a lawsuit may not be something you think about when having guests over. But personal liability is a significant financial risk, even for renters.
For instance, if a visitor trips over a toy in your living room or falls down your stairs and sues you for medical costs, legal expenses would be covered by renters insurance. The policy would pay to resolve claims and defend lawsuits brought against you.
7. Renters insurance pays if you accidentally injure someone.
Even when you’re away from home, a renters policy covers you and other household members if you’re found at-fault for injuring someone or damaging their property. If your dog bites someone at the park, for example, the liability portion of your policy would pay medical expenses and defense costs if you’re taken to court.
8. Renters insurance pays when a disaster forces you to relocate.
Another benefit that comes with a typical renters policy is “additional living expenses.” It covers the cost of a hotel and meals — up to policy limits — if you’re unable to live in your rental after a covered disaster.
Some policies pay the difference between your additional expenses and your typical living expenses, and others set limits on the amount or number of days you can claim.
Tips to shop for renters insurance
Before you get quotes for renters insurance, make an inventory of your belongings, and estimate their value. That helps you understand how much coverage you need and identify categories, such as jewelry or collectibles, that come with coverage caps. If you have many expensive items to insure, you may need to “schedule” them for additional coverage.
There are two types of coverage to choose, actual cash value or replacement cost.
- Actual cash value – pays to replace your belongings up to a limit, minus a deduction for depreciation.
- Replacement cost – pays the full cost to replace your belongings, up to a limit, regardless of depreciation. A replacement policy typically costs about 10% more than cash value but may be worth it if your most valuable possessions have depreciated significantly.
Choose a liability limit high enough to protect any savings and property you could lose if you got involved in a lawsuit. A standard policy provides $100,000 of liability, but you can purchase additional amounts.
If you’re a renter, don’t miss out on the affordable protection and assurance that a renters policy provides in the event of a disaster or lawsuit. And if you already have a policy, review it periodically to make sure that you have enough coverage to protect your finances.