Most homeowners have little choice about whether to insure their residence, since mortgages require it. And along with insurance on the structure itself comes coverage for liability (in case, say, someone is injured on your property) and for the contents of your home.
Not so for those who rent their home. While an increasing number of landlords and building management companies require tenants to insure against liability and the contents of their abode, most people are free to have their rental be uninsured.
That’s unwise, and here’s why. Naturally, any specifics we cite should be confirmed for any particular policy you currently have or plan to buy.
Your Possessions Are Probably Worth More Than You Think. Insurance experts say people--including tenants--perennially underestimate the value of their personal effects in their home. Most insurance companies have handy calculators that help you inventory and tally the total value of the contents of your home. But an estimate from Allstate of what the contents of a typical two-bedroom apartment is worth may offer a hint that you’ve low-balled the cost to replace what you own. The figure? $30,000.
Keep in mind that not every item you own, or potential damage you face, may be covered with a standard policy. As with homeowners’ insurance, you can add various endorsements and floaters to renters insurance policies. Common endorsements and floaters are for jewelry, furs, electronics, collections (such as baseball cards or stamps), and earthquake protection.
You’ll Enjoy Some Coverage Away From Home, Too. As a rule, coverage for your personal property, and liability, stay with you even when you’re away from home. That means you should be able to make a claim for that laptop stolen from your car’s trunk or if you’re sued for medical costs by someone who was hurt when you accidently tripped them at the mall.
It Will Protect You Against Liability Claims. As a renter, you can be found liable for any injury to people or damage to personal property that originated on your property, or originates with something you own.
Like a dog, for instance. The liability coverage with most renters’ policies typically cover any damages (including medical bills) associated with a dog bite. And those can be shockingly high. The average cost to settle dog-bite claims in the U.S. hit a staggering high of $37,214 in 2015 -- an amount that would probably be financially crippling for all but luxury-class renters. But even those who own no pets shouldn’t be complacent about liability. As a tenant, you could be held responsible for a host of mishaps and accidents, and the cost of remedying them. Those range from flooding--say, due to accidentally overflowing a bathtub--to fire that began in your kitchen or garbage can.
Most standard renters’ insurance policies include at least $100,000 in liability protection (in addition to personal property and loss of use coverage), which provides adequate coverage for most tenants.
It Can Pay For Temporary Accommodations. So you accidentally started a fire in your apartment, and the damage as so extensive the place was uninhabitable for a while. No problem, you say; you’d stay at your parents or a friend’s. However, if you have no such crashpad nearby, or the displacement is so long it strains the patience of your guests, you could face a hefty hotel or Airbnb bill until your place is restored to livability. Renters’ insurance policies typically include loss-of-use coverage that reimburses you for those expenses--up to the limit of the policy’s coverage, that is. If you live in an expensive city like New York City, we’d recommend you get an extra amount of this coverage.
Speaking of Airbnb, if you’re a vendor with it or other home-sharing services, you renters policy also protects you and your personal property from damages related to short-term renters, such as Airbnb guests. Your Landlord Probably Doesn’t Have You Covered. Despite what many renters think, their landlord or management company does not insure them or their personal property. Generally, a landlord’s insurance only covers the structure itself, along with the landlord’s own liability, of course. There’s no coverage by the landlord to which tenants can turn for help replacing personal property, covering a liability claim, or finding a temporary place to live in the event your rental home is damaged.
However, college students who live in a dorm are probably covered by their parents homeowners or renters insurance policy. But it’s unlikely that such coverage extends to off-campus housing--or with young people who are renting their first apartment after college.
It Doesn’t Cost That Much. While homeowners’ earthquake and flood insurance can be expensive, due to it covering the structure as well, renters insurance is comparatively cheap. The average renters’ insurance premium in the U.S. is $187, compared with the $952 average tab for homeowners insurance.