Whether you are moving into a dorm, apartment, or renting a house, this article is for you.
(Image from Taunton Federal Credit Union)
Renting feels like a DREAM! When you rent an apartment or live in a dorm, you don’t have to cover the cost of repairs, upgrades, or deal with property costs. But, you’re not completely off the hook.
You are still responsible for the items within your residence and costs due to damage or theft, and for all of the “holes” in your landlord’s insurance that leave you exposed. As a renter, you want to ensure that you and your possessions are protected by your renters insurance and the landlord policy in order to receive proper compensation.
Why do I need Renter’s Insurance?
Renters insurance is important because your possessions are not protected by the landlord’s insurance policy. Landlord insurance covers damage to the building or unit, but does not protect your possessions.
Another reason? Imagine if a visitor entered your property and got hurt. Renters insurance can protect you against liability claims - providing you compensation for an injured visitor. If the visitor chooses to file a lawsuit, renters insurance can even cover legal fees. Even further, renters insurance can cover the cost of lodging and housing expenses in the event that your property is no longer habitable as a result of fire, smoke damage, flooding, etc. Learn more about coverage in the infographic below.
Is Renters Insurance Necessary?
If you want to be sure that your possessions and protect from loss, theft, damage and protect you against liability - then yes, renters insurance is necessary. You cannot rely on your landlord’s insurance policy. Oftentimes, landlords even require renters insurance in the lease. Are you required by law? No.
How Does Renters Insurance Work?
So we know that renters insurance will help to pay for the costs of your possessions if you suffer a loss due to theft or damage. But how much compensation will you receive? That depends on the plan that you select.
Often, there are two types of compensation: Actual Cash Value and Replacement Cost. Actual Cash Value compensates you the current price of the product with depreciation. If you bought a $1000 laptop and it’s now worth $600, you will be compensated $600. Alternatively, you can be covered by Replacement Cost Insurance, which would compensate you the full $1000. Note, that purchasing replacement-cost insurance may be more expensive than actual cash value.
Certain items such as jewelry, collectibles, and other valuables may have a value limit. This means that you may not be able to receive full compensation when you claim the item. Alternatively, you can purchase additional insurance coverage so you can be fully compensated.
Sounds great...but how much does it cost?!
While the cost of renters insurance varies depending on the plan that you select, it’s surprisingly affordable. The national average for renters insurance is between $15-$30 per month. Although, remember that you get to select what items you want to insure. For example, you can insure your computer, but maybe not your sofa, bringing the cost down. As a rule of thumb, every additional $1 per month, gets you about $1000 in coverage. So, $5 a month plan would cover $5000 in possession value. The more you pay per month, the more that you can cover for less.
All in all, the basic premise of renters insurance is to fill the gaps of your landlord’s insurance. Oftentimes, renters believe that their landlords will cover property damage, however that isn’t the case, their insurance policy only protects their building. It’s generally pretty affordable and you are able to pick and choose what possessions you would like to insure, and the level at which you would like to insure them.