Renters Insurance 101

Renters insurance is something you should investigate if you’re living in an apartment, townhouse, or condo as a tenant. A good friend of mine recently had his apartment broken into and in hindsight wished he’d had insurance to cover it. 

The really unfortunate thing was he had renters insurance but cancelled it not long before he was robbed.  I asked him if he’d be willing to share his story here but the break in was only a few weeks ago and he’s still pretty upset so we’ll just go with a renters insurance overview.

What is Renter’s Insurance?
Renter’s insurance is an insurance product that will replace your belongings if the place you are renting and living in is destroyed. It is similar to the part of a homeowners insurance policy that provides coverage for items inside the home. Depending on the policy your renter’s insurance may provide the option for medical coverage if you are injured inside the home.

As with any insurance product you select the level of coverage you need (how much money you need to replace your belongings) and your deductible co-payment to make if you have to file a claim.

Why is Renter’s Insurance Important?
Renter’s insurance is critically important if you are renting as a tenant. Some renters believe that if the home is destroyed the homeowners policy that the landlord has on the property will also cover their belongings. Unfortunately this is not true. A landlord’s policy is to make the landlord whole in regards to the property itself. Your landlord’s policy only covers the physical structure that he owns not any of the renter’s belongings within the structure.

You might think you would never need insurance coverage for your belongings. You never leave grease cooking on a stove and you never leave the iron on unattended. But as a renter you are never really in full control of the situation. If you live in an apartment or condo that is connected to other residences, one of those tenants could start a fire that consumes the entire building. If you are without renter’s insurance coverage when this happen you cannot make a claim to replace your clothes, dishes, and electronics. You’ll be starting over from scratch.

What Events are Covered by Renter’s Insurance?
Each insurance company will have different clauses in their renter’s insurance policies. Before you sign on the dotted line and give the firm your money you’ll need to check to make sure you understand what is and isn’t covered.

Most policies will cover theft from the residence and destruction through fire or other disasters. However, just as with homeowners insurance you need to check on if you have coverage due to flooding and negligent maintenance by the property owner.

How Much Does Renter’s Insurance Cost?
Financially speaking there is no reason you shouldn’t have renter’s insurance. The cost of coverage is so incredibly inexpensive in comparison to the cost of having to replace all of your belongings on your own dime. Most renters insurance coverage amounts begin at $20,000.

Rates depend on:

• Type of structure you are living in (this helps the insurance company consider the risk of loss)
• Level of coverage you need (how much money it will take to replace everything you own)
• Your deductible (how much money you pay out of pocket if you need to file a claim)
• Insurance claim history (if you have had multiple claims the insurance company sees you as a higher risk)
• Other policies you hold with the company (you can receive discounts for having multiple policies with the same company; if you have car insurance with the firm you should receive a better rate than if you split your policies across several companies)

You should be able to find renter’s insurance through a reputable insurance company for less than $20 per month. The policy I found when we moved into rental town home was $13 per month. That’s about $155 per year. That cost is insignificant in contrast to paying to replace every single thing you own.

Where Can You Get Renter’s Insurance?
Most major insurance companies offer renter’s insurance. You can walk into an agent’s office to request a quote, but getting a quote online is usually best. Rates can vary based on how you request a quote – whether on the phone, in person with an agent, or online.

Online is usually the cheapest because the firm’s overheard is the lowest with an online quote. If you call a call center or an agent then they’re paying to employ the person that individual and potentially also paying a commission to them for selling the policy to you.

Kevin Mulligan is a debt reduction champion with a passion for teaching people how to budget and stay out of debt. He's building a personal finance freelance writing career and has written for RothIRA.com, Discover Bank, ING Direct, and many others.

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