Most people assume only homeowners need insurance to protect themselves and their belongings. "Many renters think because they don't own the property," says Farmers Insurance Agent Ryan Scruggs, "that they can't be held liable for injuries or damages."
But if something unfortunate happens to your apartment, you could be in for a surprise. A landlord's insurance typically only covers the rental property itself and items the landlord owns (e.g. washers and dryers). It does not cover your personal belongings in case of damage, destruction or theft. Renters insurance could provide much needed protection, but only 41 percent of renters have such coverage, according to a 2016 Insurance Information Institute poll.
You may not think you have anything worth insuring, but look again. How much would it cost to replace that laptop? Or phone? Or your clothing and furniture? Even the basics can add up to thousands of dollars. According to Allstate estimates, the average renter's belongings are worth $30,000.
Cody Thompson, a licensed insurance advocate at GetMargo.com, points out that no matter how careful you may be with your apartment and possessions, you can't control what others in the building do. "When you're living in an apartment, it just takes one neighbor upstairs to accidentally leave the water on and ruin everything in your home," he says. "I've seen this happen many times with my clients."
A standard renters insurance policy costs between $15 and $30 per month, according to the National Association of Insurance Commissioners. Most policies include liability provisions (generally up to $100,000) if guests are accidentally injured or their personal property is damaged while in your rental unit.
The cost of renters insurance can vary depending on how much coverage is needed. When evaluating insurance options, you'll need to assess the value of your personal property. This doesn't have to be an exact number, but you should have a good idea of what all your possessions are worth.
Renters insurance provides basic coverage of your personal property such as electronics, appliances, clothing and furniture if they're damaged or stolen. Policies typically cover loss caused by the following:
- Fire and smoke
- Theft and vandalism
- Windstorms and hail
- Damage from weight of snow and ice
- Accidental damage from heating or cooling systems.
- Plumbing systems freezing
- Accidental water discharge from pressurized plumbing systems or appliances
Insurance companies impose limits on personal property to ensure affordable premiums. According to the Rocky Mountain Insurance Information Association, these limits vary from an average of $200 for money, gold and silver and coins, to $2,000 for firearms and $2,500 for silverware. (You may be able to get a rider or separate policy to cover a wedding ring or other heirlooms that exceed the standard limits.)
When it comes to coverage, insurers usually offer two options: They'll reimburse you for the actual cash value of the items or the replacement cost. In general, the replacement cost is the more generous offer. For example, a TV purchased three years ago for $1,400 may only be worth $600 today because of depreciation. So if you filed a claim for its actual cash value tomorrow, you'd receive $600 from your insurance company. But if you have a policy that pays replacement costs, you'll get enough to buy a new TV. As you'd expect, policies that offer replacement costs tend to have heftier premiums.
Personal liability coverage offers protection in cases where you are found responsible for causing accidental bodily injury or damage to other people or their property. For example, if a guest trips over something in your house and injures his or her arm, liability coverage can help cover the costs of medical treatment. "Many renters think just because they don't own the property, they can't be held liable for injuries or damages, but that's not true," Scruggs says. "Liability coverage protects your future earnings from liability claims."
Nearly all cost of renters insurance includes compensation for court and legal fees associated with a lawsuit. Some insurance companies offer $100,000 in liability coverage, but many allow you to purchase more if needed.
Some policies also offer medical payments coverage, usually limited between $1,000 and $5,000. If a guest has an accident in your rental property, they may submit their medical bills to your insurance company to pay directly. Medical coverage, however, does not extend to you or individuals living in the rental unit.
Renters insurance offers peace of mind, but these policies do not cover every incident or every piece of property. "I always advise my clients that renters insurance does not cover flood damage, your roommate's personal property or any damage you cause to the rental, such as damaging carpets and regular wear and tear," says Scruggs.
Renters insurance can be especially important for college students. Besides computers and smartphones, many students have musical instruments, sports and camping equipment, digital cameras, tablets and other electronics that make college campuses a prime target for thieves. All of these items would max out a credit card if they needed to be replaced.
Students residing off campus are typically not covered under their parents' insurance policies. Scruggs and the Insurance Information Institute recommend students purchase their own renters insurance policy to protect their belongings against theft and other covered losses.
Thompson says the biggest mistake most shoppers make is not getting enough coverage. The default coverage for most policies is $15,000, which is not enough for most renters. Take a home inventory and determine what each item is worth to calculate the grand total. Then do some comparison shopping for renters insurance and select a policy amount to cover your needs.
Even though you don't own your home, your possessions and your finances are still worth protecting.
Insurance Information Institute poll. http://www.iii.org/fact-statistic/renters-insurance
Average renter's belongings are worth $30,000 (Allstate). https://www.allstate.com/resources/allstate/attachments/tools-and-resources/know-your-policy/allstate-renters-insurance-made-simple.pdf
Standard renters insurance policy costs between $15 and $30 per month (NAIC). http://www.naic.org/documents/consumer_alert_renters_0812.htm