What Is Renters Insurance?
Do you rent your home? If so, it’s important that you understand all about renters insurance.
You might think that your landlord’s insurance policy protects your home and your possessions. However, each landlord has their own specific policy. And most of the time, that policy does not cover items inside the homes or apartments.
You can provide additional protection for your property with renters insurance. Unfortunately, most people don’t know how renters insurance works, much less why it is one of the most important types of insurance.
Are you wondering if renters insurance is right for you and your family? Keep reading to discover the answers you need!
What Does Renters Insurance Cover?
Renters insurance is a great way to protect your belongings. But like all insurance policies, your renters insurance is somewhat limited in what it covers. Therefore, it’s worth answering another basic question: What does renters insurance actually cover?
Renters insurance will cover the following belongings:
- Electronics (TVs, DVD players, etc.)
- Toys/other games
- Tools/power equipment
- Appliances you brought into your place (refrigerator, washer/dryer, etc.)
If you are unclear about whether a particular item is covered or not, we recommend reviewing your policy and reaching out to the insurance carrier with any questions. You should also note these important terms in your policy:
- Replacement cost: This option provides coverage on a replacement cost basis without deduction for depreciation instead of actual cash value.
- Personal liability: If someone is injured on your property due to your fault or an insured causes damage to the property of others, this coverage will compensate them for damages.
- Medical payments: Pays medical bills if someone else is hurt at your residence.
What Events Am I Covered For?
Previously, we focused on the specific items you can count on renters insurance to replace. But it’s also crucial for you to understand the specific events that are covered by this type of insurance.
Your insurance should cover the following events:
- Theft and vandalism
- Fire and smoke
- Windstorm and hail
- Water damage from plumbing, furnace/AC, or water heater
In the event of theft or vandalism, you will need to file a police report before you can file an insurance claim. And as always, we recommend making sure you have high enough coverage to provide the protection you need.
What Is Not Covered By Renters Insurance?
Now you know about the items and events that are covered by your rental insurance policy. And that brings us to the next big question: What is not covered by renters insurance?
Your policy does not cover the following events:
- Earth movement
- Flood damage
- Power failure
- Intentional loss
- Nuclear hazard
- Ordinance or law or governmental action
In addition, these are some additional exclusions, limitations, and/or reductions in regards to coverage:
- Removal of fallen trees is excluded unless they damage your house or outbuilding or block access to your property.
- Limitations exist on coverage amounts for jewelry, guns, silverware, cash, coins, certain types of collections, art, and computers/equipment.
- Property and Liability Coverage for automobiles, watercraft, and aircraft is limited or excluded. If you are worried about your parked vehicle being damaged, we recommend taking out a comprehensive car insurance policy.
- Replacement Cost property claims are settled on an Actual Cash Value basis until you repair or replace the property.
- Losses to insured property intentionally caused by an insured are excluded.
- Losses to the dwelling caused by water or sewage from outside the dwelling that backs up through sewers and drains are excluded.
Renters Insurance Example Scenario
Our guide is going to help you learn about all the important aspects of renters insurance. But before we go any further, we need to answer a basic question: How would this insurance work in a real-life scenario?
As the name implies, renters insurance is a type of policy you can take out if you rent a home or an apartment. This provides an additional layer of protection on top of whatever policy the landlord has.
For example, your landlord likely has an insurance policy to help protect the building’s exterior from certain conditions (such as vandalism). But even if that policy also covers some of the home interiors, it is not likely to extend to your personal property.
Imagine this scenario: One of your water pipes bursts while you are at work and floods your apartment. The good news is that the landlord’s existing insurance policy will likely help fix the pipes and maybe even clean your carpets and walls.
But the landlord will not be paying for any damage to your electronics, clothing, and other important property. Fortunately, renters insurance can provide this financial protection.
In short, renters insurance exists to protect you from unknown and unforeseen threats. You never know when your home may experience fires, floods, and other unexpected scenarios. With the right rental insurance policy, you can rest assured that you are protected from these potential threats.
How Do You Know If You Need Renters Insurance?
The average person doesn’t know that much about insurance. And to make matters worse, things like car insurance and renters insurance are very different. This sometimes leads to confused renters asking a simple question: “Do I actually need renters insurance?”
And the honest (if frustrating) answer to that question is “yes and no.” From a legal perspective, renters are not required to have any degree of home insurance protection. This is different from the world of car insurance, where most states require liability insurance for all drivers.
But the fact that renters insurance isn’t legally required doesn’t mean you don’t have to have it. As we touched on earlier, this is pretty much the only way to protect what you own from floods, fires, and other unexpected threats.
So, the best way to answer the question “Do I actually need renters insurance?” is with another question: How much do you care about the things you own?
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What Happens If You Don’t Have Renters Insurance?
Sometimes, it’s tough to see the real value of insurance. After all, you make insurance payments every month. And the longer you go without any major incidents, the more you may start to feel that you’re spending money on something you don’t need.
To help you understand the value, we need to answer another basic question. What happens if there is a fire or flood and you don’t have renters insurance?
The short answer is that nothing happens. If someone had simply stolen your property, there might be a lingering hope that you would recover your items. But if things like TVs and designer clothing get damaged or destroyed in a fire or flood, there is no way to get your things back.
How, then, does renters insurance work in this situation? While the policy can’t literally bring your exact items back, the replacement cost coverage of your policy can help you buy new things. This will help you quickly replace everything from personal computers to living room furniture.
Breaking Down Renters Insurance Limits
In many respects, renters insurance is very different from car insurance. But they do share some key similarities, including coverage limits.
For example, your car is likely protected by liability insurance. But that insurance has a coverage limit. If that limit is (for example) $10,000, then your policy won’t pay anything above that amount.
Renters insurance also has coverage limits. In all likelihood, your policy will have an overall limit. This means that no matter what is being replaced, insurance will not pay anything beyond that overall limit.
On top of that, the policy may specify specific limits on certain categories of items (such as electronics or furniture). These limits will be lower than your overall limit and spell out exactly how much insurance can pay out to cover items in this category.
As with car insurance, you can always increase the coverage limits and/or lower the deductible on your policy. But this will increase the overall monthly insurance premium.
Renters Insurance Terms You Should Know
We always encourage people to check the “fine print” of their rental policy. But in order to understand your policy, there are certain key terms you really need to know. In some cases, these terms are very different from the car insurance terms you may already be familiar with.
The first term is “replacement cost.” This is a special insurance option that pays out the exact cost to replace a particular item. Otherwise, the policy will pay out the actual value of the item minus its depreciation over the years.
The second term is “personal liability.” Like liability car insurance, this type of insurance helps to pay for the injuries or property damage someone experiences in your home because of something you did.
And the final key term is “medical payments.” This specifies whether your insurance policy will help pay the medical bills for someone who gets injured inside your home.
How Much Renters Insurance Coverage Should You Have?
So far, it’s been easy to find answers to the basic questions about renters insurance. But there is one question that remains very difficult to answer: How much renters insurance coverage should you really have?
The reason this is tough to answer is that there is no one-size-fits-all answer. Instead, it all comes down to what property you own, what items you consider essential, and how much money you have in your savings account.
For example, a freshman college student living in a furnished apartment probably doesn’t need renters insurance. They likely have few items that are very valuable, and the landlord owns all of the furniture and appliances.
But let’s imagine a married couple that has been living in a townhouse for about five years. By now, they have likely replaced some of the furniture and appliances. And they have had enough time to “settle in” and fill the home with valuable property. Such a couple should strongly consider renters insurance.
How do you figure out how much coverage you actually need? First, make a list of your valuable property. Try to get an idea of how much it would cost to replace these things.
Second, begin pricing out different rental insurance policies. Your goal is to find a policy with an overall coverage limit higher than the value of your belongings.
Finally, you need to look at the liability coverage (if any) in those policies and decide if you need extra coverage. Liability insurance provides protection if someone injures themselves inside your home and decides to sue. If you don’t have enough savings to help fight a lawsuit, you should consider getting additional liability coverage.
How to Lower Your Rental Insurance Premium
Make no mistake: Renters insurance is worth the cost. Nonetheless, most people who have it ask themselves a major question each month: “Is there any way to lower my monthly premium?”
The good news is that there are several potential ways to lower how much you pay. The first way is to take out a higher deductible. While this increases the amount you have to pay out of pocket if there is an incident, it will definitely lower your monthly premium.
Another way to save money is to install certain safety devices throughout the house. Things like extra smoke alarms and deadbolts serve to make your home that much safer. In turn, a safer home typically means the insurance carrier can offer you lower prices.
In some cases, simply improving your credit can lower your rate. As with car insurance, most states allow insurance carriers to consider your credit rating as a factor in how much you pay. By monitoring and repairing your credit as needed, you may be able to negotiate a better rate.
If you have the cash on hand, one easy way to reduce your premium is to pay annually instead of just monthly. It makes for a bigger payment upfront but reduces your overall cost.
Finally, the best way to lower how much you pay is to shop around for a new insurance carrier. We recommend contacting multiple carriers and getting quotes. This way, you can pick the price and coverage level that best meets your unique needs.
Can a Landlord Require Renters Insurance?
So far, we have explored renters insurance as an option that you may or may not wish to take when you are renting a property. However, the landlord can ask you to get renters insurance before you sign a lease.
For many who rent, this leads to a simple question: Can your landlord legally require you to get renters insurance?
The short answer is “yes.” While the state cannot require renters to get insurance, it is up to individual landlords to determine the exact policies for their tenants. And just as some leases may specify that you can’t have pets in the house, others may specify that a tenant must get renters insurance.
If a landlord makes this request and you don’t want to get renters insurance, you can always try to find a different property that does not have this requirement. But after reading this guide, we hope that you strongly consider getting renters insurance to safeguard the most valuable items inside your home.
Get a Custom Renters Insurance Quote Today
Here at Freeway Insurance, we specialize in providing the insurance coverage you deserve at the prices you can afford. And we are happy to help you bundle renters insurance with auto, motorcycle, and/or life insurance.
If you’re ready to get serious about renters insurance, get started with a quote online. If you’d prefer to speak to someone in person, then come visit us at an office near you. Or, you can always dial (800) 777-5620 for a free quote today!