Why You Should Consider Renters’ Insurance

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Gretchen and her two children finally moved into their own apartment. Because the rent was a bit of a stretch, she decided to forego renters’ insurance. Everything went well until a fire alarm sounded at two in the morning after Halloween. Unfortunately, Gretchen’s short-term thinking led to a costly mistake. As a result of the fire, Gretchen lost many of her belongings and had to use her own money to re-purchase most of them, putting a huge strain on her credit and family.

If Gretchen had renter’s insurance, and even a simple cost-effective plan, she most likely would have been able to replace many of her household items under the terms and conditions of her policy, potentially saving thousands of dollars, and in the process, reducing emotional stress.

What Is Renters’ Insurance?

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Typically, a landlord’s insurance policy protects the building itself and not the renter’s personal property. Therefore, in the event of an unforeseen covered accident, the resident should look only to his/her renter’s insurance for reimbursement or coverage of the damaged personal belongings.

Renter’s insurance is a policy taken out by you, the renter, designed to protect you from the possible loss or damage of your personal belongings (i.e. furniture, clothing, and other possessions); and also typically provides liability coverage (i.e. coverage for accidental damages to third parties). It also usually provides coverage for additional living expenses as a result of displacement (i.e. if you are temporarily unable to live in your apartment, it may pay temporary living expenses, such as hotel bills).

Even a low-cost rental insurance policy can greatly mitigate a financial burden in the event of an unforeseen loss.

Typical Policy Inclusions and Exclusions

Other things to keep in mind when it comes to renters’ insurance include:

  • Policies generally have maximum coverage limit(s) based on the specific incident or otherwise.
  • There could be an amount you need to pay before the insurance coverage kicks in – this is generally known as your deductible.
  • Not every item is covered by renter’s insurance. Your policy may not protect you from the loss of certain valuables such as jewelry, watches, or special collections. Also, certain events may be excluded such as events like natural disasters.
  • You can often purchase addendums to the plan and/or umbrella coverage to add on to your core renter’s insurance plan.

You may have an option to decide how much protection you need based on the value of your possessions. Typically you can purchase coverage for their current market value, which takes into account depreciation, or for replacement cost. If you’re insured based on replacement costs, you usually don’t have to worry about much more than the insurance deductible.

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Every policy’s coverage terms and conditions are different.

Always read the policy in its entirety and make sure you understand it.

Then, be sure to save a copy of the policy and information in the unfortunate event that you have to file a claim.

The Costs

Expect to spend $15 to $50 per month plus a possible deductible.

Of course, there are a lot of factors that go into this, but generally, renter’s insurance is affordable. If you live in a 1BR in Philadelphia, and your rent is say $1,400 a month and your policy is say $25/month, that’s under 2% a month. If you live in a 1BR in say Athens, GA and your rent is $685 a month and your policy is $18/month, that’s similar at under 3% a month. If you live in NYC in a 1BR, and your rent is $3,500 a month, and your policy is $31/month, that’s less than 1% a month. Of course these are just examples, and there are a lot of factors that go into both rent and cost of policy, but just a few examples to show general affordability of renter’s insurance. As an interesting aside, the states with the most expensive renters insurance (are states with a higher than average rate of natural disasters), including Mississippi, Louisiana, Alabama, Oklahoma, and Texas.

The Bottom Line

Renter’s insurance is a relatively inexpensive investment that can provide protection against financial losses associated with accidents, theft, water, fire and other such catastrophic events.

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