Why you might need renters insurance
Renting your home rather than owning comes with its advantages. You can relocate easily. You don’t have cash tied up in an illiquid asset. And you pay your landlord to worry about repairs and property taxes.
Being a tenant isn’t entirely care-free, however. If your possessions are lost to theft, fire or natural disaster, the financial responsibility is all yours.
That’s why tenants should consider buying renters insurance. This type of policy provides financial protection against the loss or destruction of your belongings when you rent a house or apartment.
Your landlord uses your rent money in part to pay for insurance covering the physical structure of your rental property. However, that insurance policy typically does not cover the personal property of tenants.
There is good news: Renters insurance usually doesn’t cost much. Most policies cover only personal belongings, so carriers charge reasonable premiums, the Insurance Information Institute says.
Costs vary by state. According to ValuePenguin, renters insurance premiums range from $139 to $442 a year, depending on where you live.
When you buy a renters policy, your computers, electronics, furniture and clothes are covered in the case of losses from fire, smoke, lightning, vandalism, theft, explosion, windstorms and water damage – with the caveat that floods are legally distinct from water damage and are excluded from renters policies.
Renters insurance covers things beyond your physical possessions. Should you face a lawsuit by someone injured at your home or elsewhere by you, a family member or your pet, renters insurance kicks in. The policy will cover some of your damages and legal fees if you’re sued. (Beware that renters policies exclude bites by certain breeds of dogs.)
If you have to move out of your place after a fire or natural disaster, renters insurance covers your additional living expenses. Most policies will reimburse the difference between your additional living expenses and your normal living expenses, but the policy probably limits the amount.
Types of renters insurance policies
There are two types of renters insurance policies:
Actual cash value. This type of coverage pays to replace your possessions minus a deduction for depreciation up to the limit of your policy.
Replacement cost. This coverage pays the actual cost of replacing your possessions, with no deduction for depreciation. Because it’s more generous, you’ll pay more.
When deciding whether to buy renters insurance and how much coverage to pay for, consider your own financial situation. If you’re sleeping on a futon and can relocate without a moving truck, you might not need a policy at all.
If, on the other hand, your household includes kids, pets, multiple computers and televisions, you’d be wise to spend some money on renters insurance.
If you’re working from home and are getting frequent visits from clients, coworkers or Amazon drivers, you’re increasing the risk of a slip-and-fall suit or other legal headache. The liability coverage in renters insurance offers a bit of financial security.
If you’re fortunate enough to own jewelry, silver, art, antiques or collectibles that you keep in your rental property, look into adding a “floater.” That’s because the standard renters policy covers the basics, but it extends minimal coverage for valuables not used in everyday life.
A floater is a separate policy that provides additional coverage for your valuables. It even pays out for perils not included in your policy, such as accidental loss.
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