People think of insurance as a costly, obligatory expense. As such, when they find out they don’t need renter’s insurance they pass on it without a second thought. But is that a smart idea? Do you need renter’s insurance? To answer that question, it’s important to understand:
- What is renter’s insurance?
- What does renter’s insurance cover?
- How much is my stuff worth?
What is renter’s insurance?
At its core, renter’s insurance covers you and your personal possessions as they relate to your living space. It functions like other types of insurance in that you pay a monthly premium and if you make a claim, you have a deductible that you have to meet before the insurance company will cover the cost. For example, let’s say your premium is $15 a month and the deductible is $100. Every month you will pay $15, so $180 per year. During the year, something happens that causes $1000 worth of damage to your property. Your insurance company will pay $1000 – $100 (your deductible) = $900.
What does renter’s insurance cover?
Among other things, it covers the cost of replacing your stuff in the case of things like fire:
- Wind Damage
Even if you aren’t likely to experience any of the above, renter’s insurance can protect you from unexpected problems like leaking pipes. For example, while landlords are responsible for making sure plumbing is properly-maintained, problems can still occur. If a pipe bursts and creates a waterfall in your living room, your landlord may not be liable for your possessions, assuming they have been performing the proper maintenance on the building. In this case, renter’s insurance would cover your property. Renter’s insurance also generally covers your possessions while you are not at home. If you are on vacation and your luggage is stolen, renter’s insurance may cover replacement costs for the things you lost.
Another important aspect of renter’s insurance is liability coverage. This pays for damage done by your property to someone else, or their stuff. For example, something of yours falls over and puts a hole in the wall. Your renter’s insurance will pay for the repairs. It will also pay for things like medical bills and legal settlements if someone sues you because your dog bit them, or if they were injured after slipping on your rug.
Renter’s insurance can also cover some of your costs if your residence becomes uninhabitable. If you have to stay at a hotel while the roof of your home is repaired, that is covered by renter’s insurance, your landlord isn’t responsible for those costs. Actually, your landlord’s insurance doesn’t cover any of your property. It normally only covers things directly related to the building.
Do I have enough stuff to make it worth getting renter’s insurance?
The answer to this question is probably yes. When you think about the things you have, you’re probably thinking about larger items, like your new couch, your computer, or your TV. If you are like most people, you aren’t thinking about things like your forks and knives, you clothes, your books, etc. Do you have any idea how much those things cost?
- Flatware: Up to $200
- Clothes: Up to $2,500
- Books: Up to $1,400
That’s about three grand. And those flatware costs? They are only for silverware, no plates or bowls. The books, only paperbacks, not more valuable hardcovers or children’s books. If you add to that the cost of a nice sofa, $2,000, you’re at $5,000 before you’ve even considered things like your TV or your computer. The contents of even a two-bedroom apartment can easily push $40,000 and most people cannot afford to replace that all of a sudden.
When calculating the value of everything you have, there are a few different methods you can use. The method that is usually recommended is to go through your house room by room. In each room, go item by item and determine its value. Record the value. Once you’ve done this for everything in each room, add it all up and that’s the approximate value of the contents of your home. It may seem tedious, but it’s a great way to determine a rough value of your property.
Should you get renter’s insurance?
It’s important to evaluate your individual situation when it comes to whether or not you need renter’s insurance. One of the most onerous parts of paying for other types of insurance is the monthly cost. In contrast, the price of renter’s insurance is often compared to the cost ordering a pizza once a month, $15 to $30 dollars.
Additionally, renters insurance covers a wide range of events. It covers damage to your property from named events, like fires or theft. It protects your property even when something happens to it outside of your residence, if it’s stolen while you are traveling for example. If someone is injured in your home and sues you, renter’s insurance may cover your costs. Unlike something like car insurance, your renter’s insurance will pay for your property to be replaced, not just pay you the current value, for only a slight premium increase. It’s up to you to decide if you need renter’s insurance, but the monthly cost is so low compared to replacing everything you own. For example, if your renter’s insurance costs $20 a month and you have $40,000 worth of property, it will take almost 167 years for the cost of your insurance to exceed the cost of replacing all your property yourself. Even if replacement cost isn’t an issue for you, the liability protection can be very valuable. Depending on the situation, litigation, medical bills, and settlements can get extremely expensive. It may make more sense to have the protection afforded by the insurance than hope nothing happens.
Now that you’re a little more familiar with what renter’s insurance does and how much it costs, you can decide for yourself whether or not you need it. It may seem like one wasted pizza per month, but it is a lot cheaper than having to replace everything you own. Imagine not only the financial cost, but the time commitment to do that.