Moving into your own place is an exciting experience, but there’s a lot to think about along the way. One thing that most new tenants don’t take into consideration straight away is renters insurance. Also known as tenants insurance, this is a useful premium that can save you thousands of dollars.
Let’s find out more.
It’s fair to assume that as long as your landlord has insurance on a rental unit, their tenants don’t need to worry. However, that’s not quite the case. Landlord insurance covers the actual property against damage and protects the landlord in case of accidents. However, it doesn’t really do much for the tenant.
Renters insurance, on the other hand, covers the tenant and their possessions. For example, if there’s a fire and your belongings become damaged or destroyed, renters insurance will cover the cost to replace them.
Do I need renters insurance?
If you don’t have a huge amount of belongings, you might wonder whether renters insurance is worth it. It’s easy to think that you don’t own much, but take time to consider the value of what you do own. Think about clothes, appliances, computers, cell phones, etc.
If you had to replace all of these items, you might find that it’d soon cost thousands of dollars when you add it all up. With renters insurance, you don’t need to bear this cost. There are other benefits too, so let’s have a look at what tenants insurance covers.
What does renters insurance cover?
There are different types of renters insurance, with different levels of coverage:
This is the most basic type of renters insurance and simply covers the cost of repairing or replacing your belongings in case of theft or damage. While with each insurer it differs slightly, in general, you will be covered in case of damage or loss from the following:
- Strong wind damage
- Hail storm
- Frozen/faulty plumbing
- Impact by a vehicle
You can choose to cover your belongings at actual cash value or replacement cost value. When you select actual cash value, you’ll pay a lower premium, and you’ll be reimbursed for the value of your belongings at the time of the claim. This takes into account depreciation. Meanwhile, with replacement cost coverage, you’ll pay a little extra for the insurance, but you’re covered for the cost to replace the items outright.
Belongings kept in your vehicle
With some policies, you will also be covered for any belongings you have stored in your car. So, in case of theft or damage, things like laptops, phones and other items may be insured. This coverage doesn’t include sound systems or other equipment that is installed in your vehicle, though.
Additional living expenses
If your rental unit becomes uninhabitable due to damage from a covered instance, such as fire, this policy will help you cover the costs of finding alternative living arrangements. This includes hotel fees during the time it takes to repair or rebuild the home.
Accidents can happen any place, any time. But with liability coverage, if you or a guest suffers an accidental injury in your home, your insurance will cover the medical fees, and if necessary, any legal fees.
What renters insurance doesn’t cover
Most insurance premiums cover more or less the same things, but it always pays to read through your policy thoroughly. There are several items that aren’t normally covered as well — however, in some cases, you can add these to your premium for an extra cost. Generally speaking, the following items aren’t typically covered:
- Valuable items: expensive jewelry and collectible items aren’t generally covered under a basic renters insurance policy. If you have anything valuable that you’d like to cover, you’ll likely need to take out additional coverage.
- Home businesses: with more people working from home these days, more and more companies are being run from a home office. With a typical renters insurance policy, business property isn’t usually covered, so things like computers and work phones may need additional coverage.
- Vehicles: motorized vehicles parked on your rental property will not typically be covered by renters insurance.
How much does renters insurance cost?
Renters insurance isn’t overly expensive, so it’s often much more worthwhile to pay the small annual or monthly fee rather than risking it. In the U.S. and Canada, renters insurance differs in price depending on the options you choose, as well as any additional coverage you need.
On average, however, you can expect to pay around $12 to $16 per month. Indeed, most annual premiums in the U.S. cost just under $200 — far less than you might pay if you don’t take it out.
This article is intended for informational purposes only and should not be deemed as legal, financial or investment advice or solicitation of any kind. Before purchasing real estate or insurance, always consult with a licensed attorney, financial advisor, insurance agent and real estate broker.