Do I Need Renters Insurance?

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You'll need renters insurance if your landlord or your building requires it. While not required otherwise, anyone renting any type of residence long-term -- be it an apartment or single-family home -- should strongly consider purchasing a renters insurance policy. For most tenants, renters insurance is an invaluable tool to protect against potentially devastating financial consequences. But wealthy tenants have a need for renters insurance, too. A loss for a wealthy renter might not have a lasting impact, but they should still contemplate purchasing renters insurance to mitigate any loss that occurs. 

Who Needs Renters Insurance?

While an increasing number of landlords and building management companies require tenants to have renters insurance, most people are not required to purchase it and decide to forego buying a policy -- which is widely ill-advised. Anyone who rents the home they live in should probably get a renters insurance policy. The personal property, liability and loss of use coverages the policy provides can are valuable. If you're risk-averse, or it's important to you to reduce the impact of liability and loss of your belongings, then you should shop for renters insurance and purchase a policy to protect yourself. Below are some examples of specific individuals who might want renters insurance.

Arguably, the lower someone’s income, the more they need renters insurance -- especially the liability and loss of use coverages. Incidents or events that lead to those types of losses don’t discriminate against renters with various incomes. No matter how much someone earns, they could be found liable for whatever the cost of damages might be and in some cases, those costs can be quite high.

For example, consider a tenant without renters insurance whose dog bites someone. Typically, a policy’s liability coverage would cover any damages (including medical bills) associated with a dog bite. But without it, they would have to pay for those out of pocket. The average cost per dog bite claim in the U.S. reached a record high $37,214 in 2015 -- an amount that could be financially crippling for some renters and only a setback for others.

But even wealthy tenants have significant needs for renters insurance. Self-insuring a rental is not usually recommended. While a wealthy renter might be able to afford to pay some liability claims out of pocket, they might in turn be risking the value of all their personal belongings in their rental home. For example, the cost of a dog bite claim (mentioned above) might not scare a wealthy tenant, but the possibility of a fire destroying hundreds of thousands of dollars in personal property should. Without renters insurance, any belongings damaged or destroyed for any reason would have to be replaced out of pocket. 

A renters insurance policy can also help tenants who are unprepared for a calamity. In the event a renter’s unit or home is deemed uninhabitable by an authority, they would be stuck paying out of pocket for any inconveniences if they didn’t have renters insurance. That includes the cost of a hotel stay, food and special transportation they would need to continue to live until they could return home or find a new permanent residence. 

In theory, everyone adequately saves money for such circumstances but some might not. Loss of use coverage reimburses renters for those expenses (up to the limit of their policy) which can offset any long-term financial damage it might cause.

Many college students should also consider buying renters insurance. Anyone living in a college or university dormitory is likely covered under their parents homeowners or renters insurance policy. But every college student that lives off-campus needs their own policy.

Misconceptions about Who Needs Renters Insurance

There are a number of common misconceptions about renters insurance that might keep tenants from purchasing a policy. We’ve listed and dispelled some of those below.

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 building itself where tenants live. Renters are solely responsible for insuring their personal property, liability and expenses related to loss of use.

While homeowners, earthquake and flood insurance can be expensive, renters insurance is comparatively cheap. The average renters insurance premium in the U.S. is $187, while the average homeowners insurance policy is $952. Most standard renters insurance policies include at least $100,000 in liability protection (in addition to personal property and loss of use coverage), which is good value for the cost of most renters policies.

No matter how careful a tenant thinks they are, they should strongly consider their need for liability insurance. Too many renters think they don’t need liability protection because, for example, they rarely have guests and the likelihood of someone injuring themselves at their place is almost nonexistent. That form of self-assurance is danagerous. Accidents happen -- someone might accidentally flood their bathtub, leave a candle burning or drop a cigarette -- and it’s best to be prepared for anything. Liability coverage isn’t just for incidents that occur inside a renter’s home, either. The coverage travels with the policyholder wherever they go.

Failing to purchase a renters insurance policy because you don’t own many valuables is a mistake for two reasons: Almost everyone’s personal belongings are worth more than they estimate and this philosophy completely disregards the value in liability and loss of use coverage. Even if a renter had no personal property, the other coverages provided make renters insurance worthwhile.

Overlooked Benefits Of Renters Insurance

Beyond the obvious coverages and benefits of renters insurance, there are some lesser-known perks that might help convince tenants it’s a good idea to purchase.

Like homeowners insurance, renters insurance policies can add endorsements and floaters to bolster their coverage of personal property. Common endorsements and floaters are for jewelry, furs, electronics, collections (such as baseball cards or stamps), and earthquake protection. Without a renters insurance policy to attach endorsements and floaters to, a tenant would have to have a specialty policy underwritten for any specific item, which would likely be far more expensive.

Coverage for personal property and liability also travels with a renter, so they can relax with their belongings no matter where they are hauling them. The limits of a renters insurance policy still apply, but that coverage is certainly better than nothing. It’s easy to misplace something like a necklace or watch while traveling and those items might also be more susceptible to being stolen (and thefts are covered by renters insurance).

Renters insurance also protects a policyholder and their personal property from damages related to short-term renters, such as Airbnb guests. Home-sharing is a good way to make some extra money and, as long as a renter is within the rules of their policy, renters insurance offers a layer of protection in the event something were to happen to their guests or belongings.

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