Renters insurance is something you might consider if you own a house or apartment. Renters insurance provides financial protection for personal property and coverage for liability in the event of an injury to your property.
According to the Insurance Information Institute, (Triple-I), renters insurance costs on average $179 per annum Renters insurance, just like auto coverage is an important part of your financial plan. You are not the only one who has wondered about renters insurance. Understanding the coverage of renters insurance can help you feel more at ease and in control over your finances.
What is renters insurance?
Renters insurance policies can provide coverage in many areas and can be tailored to meet your specific needs. These coverages are standard but all rental insurance companies may offer different ones. It is a good idea to check with your agent about the coverages that are included in your policy.
These coverages require you to first pay a deductible, as per your policy. Then your insurance provider will cover the costs.
Liability coverage provides financial protection to you in the event of an injury on your property. This coverage could pay for legal fees and attorney fees. Your liability coverage could even cover injuries that you are found to be at fault for and which occur outside your home, such as your dog hitting a neighbor while you’re out on a walk.
Renters insurance policies include liability coverage. Although liability coverage is usually offered starting at $100,000, $300,000 or even $500,000 are common coverage levels. Although these amounts seem expensive, if someone is hurt and sues, it can quickly add up.
Protection for personal property
A renters insurance policy does not include personal property coverage. A renters insurance policy doesn’t include dwelling coverage, as your landlord is responsible to the structure of your apartment or rental home. Renters insurance covers your personal possessions like clothing, furniture, and electronics.
Your personal property is covered by renters insurance policies on a named peril basis. This means that you are only covered in certain circumstances. These are the most common named perils.
- Lightning or fire
- Hailstorms or windstorms
- The weight of snow, ice or sleet can cause damage
- Intentional steam or water leakage from household appliances, plumbing, heating, air conditioning, sprinkler systems, or other sources can cause damage.
- Accidental cracking, burning, tearing away, or bulging of a hot water heating system, sprinkler system, or air conditioner can cause damage.
- Frost damage to household appliances, plumbing, heating, air conditioner, sprinkler systems, or plumbing can cause significant damage
- Accidentally generated artificial electric current can cause damage
These perils do not apply to personal property. For example, if your ceiling collapses after heavy snowfalls, your renters policy will cover the cost of your personal property, while your landlord’s policy will cover the cost of the damage to the building.
Actual cash value vs. replacement cost
You will typically have two options for personal property coverage with renters insurance policies: actual cash value and replacement cost. There may be a third option called guaranteed replacement cost coverage. These will determine the coverage you have after taking into consideration your deductible.
Your belongings will be replaced at their current value if you have actual cash value (ACV). If you buy a TV at $1,000, and it loses 10% each year, it will be worth only $500 after five years. Your insurance adjuster will calculate depreciation in order to determine the amount you should be paid if your TV is damaged. Depending on the condition of your TV, you may get more or less depreciation. ACV policies are usually the cheapest option.
You will receive replacement cost coverage that covers the cost of replacing your damaged or destroyed items by comparable new items. A replacement cost policy, for example, will pay you $1,000 to replace the TV shown above, even though it is five years old. Because you agree to receive a greater amount, replacement cost policies tend to be more costly than ACV policies.
The Guaranteed Replacement Cost policy takes things one step further. Guaranteed replacement cost policies will pay more if your items are damaged or destroyed than their original value. A guaranteed replacement cost policy should cover the $1,500 cost of replacing your TV damaged, even though it costs $1,500. These three options are typically the most expensive and not available from all companies.
What is renters insurance not covering?
Renters insurance is a great option for financial protection, but not all coverage. There are some common exclusions to renters insurance policies.
- Flood damage: If flooding is a concern in your area, consider purchasing a separate flood insurance policy.
- Earthquake damage: By endorsement, you may be able add earthquake coverage onto your policy. You may need separate insurance if you live in an area where earthquakes are frequent.
- Pest damage: It is the landlord’s responsibility for maintaining your apartment or rental home. Renters’ insurance policies usually exclude pest damage to personal property. Your damages should be covered by the landlord’s insurance policy if your landlord is found to have allowed pest infestation.
- You need auto coverage to get coverage for damage to your vehicle or theft. If your personal items are stolen, they may be covered by your renters policy. However, the car or damage to it will not be covered by a renters insurance policy.
- Your roommate’s possessions: If you and your roommate are listed as named insurables on a joint policy, then your renters insurance policy does not cover your roommate’s belongings.
- You are responsible for any damage that exceeds your policy limits. If you have renters insurance, you should think about how much coverage you will need to replace your possessions. You can also limit your liability coverage to only the amount you select. Renters insurance does not cover damage to your unit or injuries to your family members.
Each renters insurance company is unique, so it is best to talk to your agent to find out what is covered.
What modifications can you make to renters insurance policies?
Many renters insurance policies include endorsements that can be added to personalize your coverage. These are some of the most common endorsement options:
- You can get replacement cost coverage for your belongings
- Identity theft protection
- Insurance coverage for business property
- Coverage for refrigerators
Talking to a licensed agent can help you decide the right policy options for you.
Questions frequently asked
How can I pick a renters’ insurance company?
Many renters insurance providers are available, making it difficult to find the right coverage. Requesting quotes from multiple companies is a great way to find the right coverage for you. This will allow you to compare the available coverages, discount options, and prices.
Is my pet covered by my renters’ insurance?
Renters insurance policies may provide additional liability coverage for injuries your pet causes to others. However, there are certain breeds which are often excluded from coverage. Exotic pets can also be excluded. You will need a pet insurance policy if you want to provide health insurance coverage.
If I get hurt, will my renters’ insurance cover my medical costs?
No. No. Your landlord’s insurance might cover your medical costs if you are hurt on the property. You would also need health insurance to cover your injuries.