If you're renting, you should have an insurance policy to cover your belongings.
Your landlord's insurance policy covers losses to the premises, structure and the landlord’s personal property. Your personal property and certain liabilities, however, are covered only by a renter's insurance policy that you, as a tenant, would have to secure. While 95 percent of homeowners have a homeowner's insurance policy, only 37 percent of renters have renter's insurance, according to a 2014 Insurance Information Institute poll.
Why do so few renters have insurance? One theory is that many people incorrectly assume they are covered by the landlord's policy.
Another reason is that people underestimate the value of their belongings. If you add up the value of just your clothing and electronics, it probably won't take long to get into the thousands of dollars.
Another often overlooked reason is if someone is injured on the property; a friend, neighbor, or the pizza delivery person; they could sue you.
Even if you think you didn't need insurance, here are some reasons why you should get a renter's insurance policy.
The average renter's insurance policy costs $187 a year, according to the National Association of Insurance Commissioners (NAIC), in 2013. The actual cost depends on several factors, including how much coverage is needed, the type of coverage chosen, the amount of the deductible, and the state. For example, a resident of Mississippi might pay the most (average $252 a year); in North or South Dakota, a resident would pay the least (average $117 a year).
It covers losses to personal property.
A renter’s insurance policy protects against losses to personal property, including clothes, jewelry, luggage, computers, furniture, and electronics. Even if you don't own much, it can quickly add up to a lot more than you realize, and it could be more than you'd want to pay to replace.
According to esurance.com, the average renter owns about $20,000 worth of personal property. Renters’ policies protect against a surprisingly long list of perils; however, it pays to ensure the policy has adequate coverage for a renter’s needs. Losses resulting from floods and wind damage, for example, may require additional coverage or a “rider.”
Renter’s insurance policies do not cover losses caused by negligence or intentional acts. For example, if the renter falls asleep with a lit cigarette and causes a fire, the policy most likely will not cover the damage.
Your landlord might require it.
A growing number of landlords require tenants to purchase their own renter's insurance policies and expect to see proof. Or, it could be required by the landlord's insurance company; the idea being if the tenants have covered themselves, some responsibility can be shifted away from the landlord.
If you need assistance finding or obtaining coverage, your landlord may be able to help.
It provides liability coverage.
Liability coverage is also included in the standard renter’s insurance policy. It provides protection if someone is injured while in the home or if the renter (or another covered person) accidently injures someone. It pays any court judgments as well as legal expenses, up to the policy limit.
Most policies provide at least $100,000 of liability coverage, and between $1,000 and $5,000 for medical payments coverage. You can request, and pay for, higher coverage limits. If you need more than $300,000 of liability coverage, ask your insurance company about an umbrella policy, which can provide an additional $1 million worth of coverage for about $150-$300 a year.
It may cover additional living expenses.
If your home becomes uninhabitable due to one of the covered perils, your renter's insurance policy may cover additional living expenses, including the cost associated with living somewhere else temporarily, food and more. Check your policy to find out how long it will cover additional living expenses, and if it caps the amount the company will pay.
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