Renters Insurance: Coverage, Perils, and Roommates
If you’re renting an apartment or house, you should have renters insurance for your apartment or house. Your landlord likely has an insurance policy to protect the structure of the building you’re living in, but their policy will not protect you or your belongings. Renters insurance, which is a type of policy called an HO-4, gives you some financial protection against natural disasters or common theft that can affect your living space and things. It covers your personal belongings, liability for accidents that happen in your dwelling and will reimburse living expenses should your rental unit become uninhabitable.
What Renters Insurance Covers
Whether you are renting a 5,000-square-foot house or a 500-square-foot studio apartment, your valuables might be worth more than you think. Should something happen to your rental and your personal property gets destroyed, it might cost thousands of dollars to replace it. The best renters insurance companies would pay so you have funds to replace your belongings - from your expensive television to the sound system.
The personal property coverage with renters insurance protects your belongings from a number of different perils, similar to homeowners insurance. Depending on the policy, covered perils can include: fire or lightning; windstorm or hail; an explosion; riot or civil commotion; damaged caused by aircraft; damage caused by vehicles; smoke; vandalism or malicious mischief; theft; volcanic eruption; falling objects; weight of ice, snow or sleet; accidental overflow of water from within a plumbing, heating air conditioning or automatic fire protection system; sudden and accidental tearing apart, cracking, burning or bulging of a steam system, heating system, air conditioning or automatic fire protection system; freezing of plumbing and other systems; and damages from artificially generated electrical currents.
Liability coverage is important because it protects the policyholder and their family members (including pets) from lawsuits for bodily injury or property damage that they are to blame for. It also will pay for court costs as well as any awards you’re ordered to pay in court, up to the limit of the policy. This coverage also travels with you and your family members to your neighbor's' house or anywhere else in the world. For example, if your dog bites someone in your apartment and the victim files lawsuit, your renters insurance would cover that incident. If you did not have renters insurance, you would have to pay the costs resulting from that incident out-of-pocket.
Loss of use (sometimes called additional living expense) coverage gives renters insurance policyholders financial protection and peace of mind in the event their rental home becomes uninhabitable. For example, say a fire damages your apartment and you cannot stay there until repairs are completed. If you don’t have renters insurance, you would have to pay for the cost of staying somewhere else out-of-pocket. Your renters insurance company would pay for the cost of your stay at a hotel or elsewhere until you could return to your rental.
It is important to carefully consider all of these coverages independently when shopping for a renters insurance policy. Some renters might find one area of coverage is inadequate, given their individual circumstance, and choose to purchase an endorsement or schedule items.
The Cost of Renters Insurance
Where your apartment or house rental is located and the amount of coverage you need are the biggest factors companies use to calculate your renters insurance quote. The average annual premium for renters insurance costs $187 in the U.S. but averages in other states are higher and lower and there are outliers within states. For example, like homeowners insurance, renters insurance is more expensive in Florida because of the increased risk of perils (especially tropical storms and hurricanes). Florida’s average renters insurance annual premium is $217 but that number is an average - there are renters who will pay more. North Dakota ranks with the cheapest renters insurance, while Louisiana ranks with the most expensive. Renters in California, Texas and New York saw annual rates averaging $215 across the three states. Suffice it to say, it is much cheaper than the cost of insuring a house ($952).
Location of your rental house or unit aside, how do you determine how much coverage you need for your belongings?
You can estimate the value yourself but there are tools that exist to help you. A number of companies, such as Allstate, have personal property calculators online to help customers determine the amount of coverage they need. No matter the cost to rent a house or unit, what is really important is the value of your property inside when determining the amount of coverage you need.
Should Roommates have Renters Insurance?
Yes. Having a greater number of roommates, or other neighbors, for that matter, can mean greater exposure and risk. Remember, even if you consider yourself responsible, you likely live next door to a number of other college students or people, and you have no control over who your neighbors are. For example, if your neighbor leaves a candle lit and burns down part of your apartment complex while everyone is at class or at work, you don’t want to have to replace your belongings and pay for a place to stay out-of-pocket.
Renters insurance only protects the property of the people listed on the policy. So if you have roommates who are under the impression their belongings are covered, make sure that you add them. Know too, that that adding additional people to the policy will affect it and could affect your rate in the future is someone files a claim. For that reason, it is recommended that each roommate get their own renters insurance policy. Whether they are listed under your renters insurance policy or not, theft by a roommate is not covered by renters insurance.