UPDATED: Mar 13, 2020
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The Importance of Renters Insurance
So maybe you aren’t ready to own your own home yet. Or maybe you’re renting a room or part of a house while you strive for your own home ownership status. That doesn’t mean you don’t need some sort of financial protection. Although renters insurance is a relatively new trend, it has been growing in popularity over the last decade. And even if you’re only renting, it’s still important to protect yourself and your property from financial ruin.
What is Renters Insurance?
In a nutshell, renters insurance protects a tenant or tenants from property loss and liability expenses. Some policies may also pay for expenses in the event that a disaster makes your living situation uninhabitable. You don’t need to purchase any dwelling protection, which makes renters insurance policies much less expensive than homeowners insurance. Also, in the same fashion that homeowners insurance is required by a mortgage lender, you may be required to purchase renters insurance as part of the terms of your lease agreement.
Personal Property Coverage
If anything happens to your personal property while you’re renting an apartment or a section of another person’s home, then you can get some form of reimbursement from your renters insurance company. You should keep in mind, though, that the maximum claim reward you can collect is limited by the amount of coverage you buy. And, much like other forms of property insurance, specific high-dollar items may either have coverage caps, or require you to buy specific riders that will extend your coverage limits.
There are two instances where your liability insurance company may have to pay out on a claim. One of these is if you are found at fault for damaging the dwelling you’re renting or other property owned by your landlord Additionally, if you are found at fault for injuring a guest who incurs medical expenses as a result of that injury, your insurance company may also be required to pay out a financial award for a liability claim.
Additional Living Expenses
If something happens to the residence you are renting, and you have to live somewhere else while the damage is being repaired, it can get pretty expensive, and quickly. But renter’s insurance can also help you mitigate some or all of these costs. Just keep in mind that your expenses will only be covered up to the limits of your policy. So if you’re located in an area with a high cost of living, such as New York City or Los Angeles, it might be a good idea to purchase a higher coverage limit.
Which Perils Are Covered (and Not Covered) by Renter’s Insurance?
The types of perils covered by renters insurance are pretty similar to what you might expect to see on a homeowners insurance policy. Likewise, many of the perils which are not covered by homeowners insurance policies are also not covered by renters insurance. The chart below helps break down what is and is not covered:
|Covered Perils||Perils Not Covered|
|Vandalism||Bodily Injury Caused by Specific Dog Breeds|
|Water Damage (excluding floods)|
Also, similar to homeowners insurance, you may be able to get coverage against floods and earthquakes through outside sources. There are more options with earthquake insurance, seeing as how it isn’t as prevalent as flood damage. You may even be able to get a rider for earthquake coverage from your current insurer. Flood insurance, on the other hand, is easily obtainable through the National Flood Insurance Program.