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Renter’s Insurance: Is it Worth it?

Renter's Insurance: Is it Worth it?

You’re lying in bed one night when water comes gushing from the ceiling onto your new big screen television. You eventually find out a pipe burst, which caused the miniature version of Niagara Falls to invade your apartment.

Water damage is just one of the many reasons why you should buy renter’s insurance, suggests Whole Property Management in Parker. Although renter’s insurance does not cover the physical structure of the building where you rent an apartment, in most cases, it does cover your possessions, as well as a few other things that many tenants do not know about.

Renter’s insurance is a straightforward contract that you have with an insurance company. The answer to the question “Is it worth it” is a resounding yes.

Pros of Renter’s Insurance

The primary reason tenants take out renter’s insurance policies is the policies pay for the cost of replacing stolen or damaged personal possessions. Think of renter’s insurance as a security blanket that gives you peace of mind every time you leave the apartment.

The policies cover a wide variety of items:

  • Cookware
  • Appliances
  • Furniture
  • Clothing
  • Electronics
  • Jewelry
  • Sporting goods
  • Automobile
  • Power tools

Although covering the cost of replacing your possessions is the most important pro of a renter’s insurance policy, there are several other reasons why you pay for the ultimate security blanket.

Cost of a Hotel

After a disaster, you might have to seek temporary shelter at a nearby hotel. Whether your apartment succumbed to a fire or a tree fell into the building, a renter’s insurance policy should include a clause that states your insurer covers the cost of temporary lodging.

Medical Costs

This clause covers the medical expenses racked up by guests to your apartment. A simple slip and fall can lead to a personal injury lawsuit that puts you on the legal hook. Dog bites are another common health issue for tenants. According to the Insurance Information Institute, typical renter’s insurance policies cover the costs of medical expenses for a guest between $1,500 and $5,000.

Items You Rented or Borrowed

Let’s say you borrowed a friend’s laptop. Because of a burglary, the laptop is one of several items missing from your apartment. A comprehensive renter’s insurance policy contains a clause that covers the cost of replacing items that a tenant borrowed or rented.

Off-Premise coverage

Some renter’s insurance policies cover items stolen from a car or a hotel room. However, off-premise coverage is often limited to a small percentage of your total coverage for renter’s insurance.

 Renter's Insurance: Is it Worth it?

How to Choose the Right Renter’s Insurance

Before the COVID-19 pandemic, rising home prices and stricter lending regulations led to a surge in renter’s. As of late 2020, renter’s account for more than one-third of American households. If you are considering purchasing renter’s insurance, the Sacramento property management experts at Utopia Management have a few tips to help you sign up for the right policy.

Decide on the Right Amount of Coverage

State Farm recently released a few statistics that pertain to renter’s. According to the insurance giant, the average tenant owns more than $35,000 of personal possessions. The amount of coverage you need depends on several factors in addition to the value of your stuff. To determine the value of your possessions, complete a thorough inventory that includes the price you paid for each item. Then, add up the prices of every time to calculate an accurate value. Remember to factor in liability and off-premise coverage, which boosts the total amount of your renter’s insurance coverage.

Understand What a Policy Does Not Cover

Do not assume that your stuff is covered after a major natural disaster such as an earthquake or a hurricane. A growing number of insurance companies have modified renter’s insurance policies to eliminate coverage for high-risk natural disasters. For example, if you live in an apartment located in a flood plain that has experienced a few major disasters over the last 20 years, your insurer might leave out flood coverage for a renter’s insurance policy. Ask for an explanation from an insurance company about which types of natural disasters the company does not cover.

Learn about the Two Types of Coverage

There are two primary types of renter’s insurance coverage: replacement value and actual cash value. A replacement policy does not include depreciation in calculating the value of an item. An insurance company pays for the loss of an item based on its current fair market value. On the other hand, actual cash value policies consider depreciation when establishing the value for a stolen or damaged personal possession.

Consider a High Deductible

A deductible represents the amount of money that you pay out of pocket for replacing stolen or damaged items. Standard deductibles for renter’s insurance run from $200 to $1,000, although some insurers go higher. You should balance the risk of losing your stuff to theft and natural disasters against what you can afford to pay out of pocket to replace valuable things like a stereo and a desktop computer. A good idea is to create an emergency fund that covers the deductible for your renter’s insurance policy.

One of the biggest misconceptions tenants have is they cannot afford renter’s insurance. In most cases, tenants cannot afford to forgo renter’s insurance. The National Association of Insurance Commissioners estimates the average amount paid monthly for renter’s insurance is between $15 and $30. That almost equals a night out dining at a casual themed restaurant. For just $30 a month, you protect all of your stuff from Murphy’s Law: anything that can go wrong will go wrong.