It is common knowledge that homeowners’ insurance is one of the basic things a homeowner should secure as soon as they buy their first home. As the name implies, a homeowners insurance offers protection for the property owner. It covers the cost of repairing or replacing the property for damage or loss. In the event of theft, it also offers coverage for personal belongings. But what if you’re renting? Does homeowner’s insurance cover the renter’s personal belongings?
One might be inclined to think that the homeowner’s insurance should suffice as it would cover the property and everything in it. But does it? The answer is NO. However, this misconception is also one of the reasons why tenants do not get a renters’ insurance policy to protect their personal belongings or protect themselves against personal liability claims.
And this is where the renters’ insurance enters the picture. Where rental properties are concerned, a homeowner’s insurance policy covers the structure of the property, and a renters’ insurance covers the personal belongings inside the structure (which would naturally belong to the renter or the tenant). Now that we’ve made that distinction, the following are the top seven reasons why it is very important to get renters’ insurance.
Protection for your personal belongings
A renters’ insurance policy offers the policyholder coverage for losses or damage to personal belongings. If let us say, you work from home and you lose your work equipment due to theft and it will cost you $3,500 in total to replace it, your landlord’s homeowner’s insurance will not cover that, but a renters’ insurance will.
Aside from theft, your policy may cover the repair or replacement of your personal belongings for damages or loss due to fire, lightning, explosion, riots, falling objects, smoke, vehicles, and weight of ice or snow, among others. Note that appliances or equipment such as heating and air conditioning systems, and even sprinklers, which can be affected by very low temperatures can also be covered by renters’ insurance policies. You may also have coverage against theft for the personal property stored in your car or somewhere outside your rented property. If the basic policy does not, ask about coverage for extended theft.
Protection for your guests or against personal liability claims
A renters’ insurance does not only cover your personal property. It also protects you against liability claims if anyone is hurt due to an accident while within your premises. If, for example, you leave your garden hose lying around in the grass and a delivery man trips because of it and hits his head on a rock, you might actually get sued for it. The personal liability coverage part of a renter’s insurance will help cover court expenses, defense fees, and other lawsuit-related costs.
In the same manner, if you have a dog and it happens to bite a guest, some states would require the pet owner to cover the medical expenses. And even if the state did not require it, your conscience most probably would.
Replacement or repair of personal property damaged because of natural disasters
Nobody wishes for natural disasters to happen, but they do. And when they do happen, one might literally lose everything, especially in areas where earthquakes, tornadoes, hurricanes, and wildfires happen more often.
Coverage for extended fire
A fire that starts from a condo unit or an apartment can spread easily and can cause damage to the properties of other occupants. If this happens, you can expect to be found liable for any damage to their property and it sure would be good to have a policy in place.
Repair or replacement of property damaged by yourself
There might come a time when you unintentionally damage your own property. Whether you ruin your rug because of water overflowing from the washroom or something screwed to the ceiling falls and damages the sofa, you can call it in and your insurance provider will shoulder the cost of repair or replacement, depending on the specifics of your policy.
Coverage for living expenses while the rented space is inhabitable
A renters’ insurance policy will also have coverage for situations where you are ‘forced’ to rent another space and incur additional living expenses for reasons covered in the policy. For example, when the property becomes uninhabitable due to flood or fire.
Very affordable peace of mind
According to ValuePenguin, as of 2019, 37% of US households rent, and only 40% of these households have purchased renters’ insurance even when the average cost of a policy is only $15.58 per month. In North Dakota, one can get a policy for about $9.58.
Nowadays, almost everything has a corresponding insurance policy–your business, your car, your home, your life! Some companies even purchase insurance with their top executives as the insured if they know that the company will suffer financial losses if anything happens and the executive isn’t able to work due to illness or death.
Bottom line is, although an insurance policy is often seen as an ‘additional expense’, it is wiser to see it as an ‘investment’ with the purpose of shielding yourself from financial troubles when unexpected circumstances arise which you are not financially prepared to handle.
For $10 or even $20 a month, would you not want to have the peace of mind that a renters’ insurance policy in place would help you shoulder unexpected (and definitely unwanted) expenses or might even help you replace everything in your home which could easily amount to $20,000 or even $40,000?
When buying a renters’ insurance, there are a few important things to remember:
- Within a renters’ insurance policy, coverage for personal property is separate from coverage for personal liability. There is also a deductible where the policyholder shoulders the first X amount of dollars in case of any claim. Everyone works with a budget, so assess your situation. If you are single with not many personal belongings but do have a pet and you always have visitors, then it might be wise not to skimp on the personal liability coverage. But if you live in an area where you hear of theft more often than you’d like, and you have a family and everyone is into high-end gadgets, then be a bit generous on your personal property coverage.
- Always have your payments up-to-date. You can choose to pay monthly, but if you can afford to pay annually, this assures you that your policy is active and in place at any given time of the year. Your policy, no matter how many millions it might cover, would not do you any good if it is not active due to a payment you missed.
- These insurance policies are not a one-size-fits-all where everyone gets the same coverage and pays the same amount each month or each year. Depending on your assets and personal circumstances or net worth, and of course your budget, you can increase or decrease your coverage.
- Some basic policies may not have coverage for flood, earthquake, wind damage, and other exclusions. In situations like this, you can always ask about ‘riders’ or additional coverage on top of the basic policy. It is always best to be meticulous about what you are paying for and what you are getting in return.
- Ask about caps. Some coverage might have caps on the amount that the insurance provider would shoulder.
- Check your options. There are many insurance providers who can give you quotes online or brokers who would be able to help you choose the best coverage depending on your needs.
Need help with a personalized renter’s insurance coverage? Contact us today and we can help you with that!