Nearly two-thirds of tenants do not hold renters’ insurance policies for the homes they are living in currently. Many renters who do have insurance only have minimum-coverage policies.
Too many tenants do not understand the full implications of failing to have insurance for their homes. Purchasing renters’ insurance is accompanied by a large number of benefits. Find out more in the following sections.
Why Do You Need Renters’ Insurance?
Most renters assume damaged or destroyed items are covered by their landlords’ insurance, but they are not. Generally, a landlord’s property insurance policy only covers the apartment building. In addition, injuries are only the responsibility of the landlord if they are related to the building’s construction or grounds.
Renters’ insurance basically does two things: it protects you and your family, and it protects your belongings. This includes personal liability insurance to ensure legal expenses are paid if someone is injured in your home. Some insurance policies for renters cover alternative living expenses in the event you are displaced from your home due to severe damage to the property.
How Insurance Protects Your Possessions
If your rental unit becomes significantly damaged, many of your personal belongings have likely been damaged as well. This ranges from small items like clothing and books to larger and more expensive items such as televisions and furniture. Although the building’s damage is paid for by the landlord’s insurance, it does not compensate you for the loss of your personal possessions.
By purchasing renters’ insurance, you receive compensation for the belongings that were damaged or destroyed. Without renters’ insurance, you are forced to pay for the replacement items yourself. This could leave you out-of-pocket and even in debt.
You may think your belongings are not worth much and it is therefore not worthwhile to insure them. Have you actually stopped to work out how much it would cost to replace your possessions though? On average, renters’ belongings are worth approximately $20,000. Few tenants are equipped to handle this cost in the event of disaster. Renters’ insurance eases the burden when the worst-case scenario happens.
Renters commonly make the mistake of thinking they do not require insurance because they are responsible and careful in their actions. This is a flawed conception to have. Everyone makes mistakes and no one can prevent physical factors like earthquakes and floods causing damage. Most property damage is out of the renter’s control.
How Insurance Protects Your Guests
Due to liability law, it is usually the case that if a guest at your home is injured, you are responsible for paying the medical expenses. If the injury occurred because of a direct fault of the building’s structure, your landlord’s coverage typically covers these costs. In all other scenarios, the legal liability lies with you.
If you do not have renters’ insurance, you must pay for the costs yourself. Depending on the injury, this may be expensive. By purchasing renters’ insurance, you are safe in the knowledge you do not have to pay for the medical expenses of the guest who is injured, or any other legal costs associated with the incident.
How Insurance Protects Your Family
If your home becomes too damaged to live in, you must find temporary accommodation. Floods and fires occur unexpectedly.
If your home is damaged to the extent that you cannot live in it, what are you going to do and where are you going to go while you wait for the repair and restoration work to be done? How will you afford to live in other accommodation? Can you take your belongings with you? To save unneeded panic in this unfortunate scenario, purchase renters’ insurance.
In particular, you need a renters’ insurance policy designed to protect your home in the event of the above scenario. Alternative Living Expenses coverage helps pay for the cost of staying in hotels, dining and other expenses while you wait for your home to be fixed.
In addition, if the expenses are significantly larger in a specific category, the ALE policy covers the difference between the new expense and the standard costs. For instance, if your commute to work ends up taking twice the amount of time, your ALE insurance usually pays for the extra transportation costs.
How to Select a Policy
Renter’s insurance policies provide good value for the money. The average cost for a renters’ insurance policy nationwide is $200 annually. Do not just plump for the cheapest coverage, though. You must make sure you have insurance for each element concerning your personal situation. To ensure you select the best policy for your needs, consider the following:
- Get the Right Type of Policy. Two main types of policies are available for you to choose from. Replacement cost policies replace your damaged or destroyed possessions at the full amount required to replace each item. This policy is usually more expensive, but it is worth paying the extra amount. The other main type of policy is an actual cash value insurance policy. This costs less than a replacement cost policy. The amounts paid out only cover the value of an item at the time the item is damaged or destroyed. For instance, if you have a replacement cost policy and your television is damaged and needs to be replaced, you receive funds to buy a brand-new television. If you had an actual cash policy, you only receive funds amounting to the value of your damaged television. Typically, this is significantly less than the former. In addition, basic policies may not cover certain things, such as natural disasters like earthquakes and floods. Make sure you know what your renters’ insurance policy does and does not cover.
- Deductibles. This is the amount of money you must spend as a policyholder before the insurance starts to pay for damaged items, injured guests’ bills and other items. Typically, the higher your deductible is, the lower your overall insurance policy is going to be. Large deductibles mean you must pay more during an emergency event before insurance funds are paid out.
- Specialty Riders. You may need special insurance riders for particular types of high-end items you own. This applies to belongings such as heirlooms, jewelry and specialized equipment.