Whether you want to know more about renters insurance or are looking to buy a premium for your rented home, learning more about an insurance premium is the best course of action.
Because insurance can be a slippery slope, tons of factors and policies are at play, and no one has the time to go through a list of comprehensive policies that are hard to understand.
In fact, according to CNBC, close to 40 percent of policyholders said they are unaware of the contents of their policies. In addition, only 60 percent of respondents say that they did research before buying an insurance policy.
However, insurance is also necessary for unforeseen circumstances. It protects a policyholder and their belongings against damage and expenses.
Lucky for you, this blog covers everything there is to know about renters insurance in 2022.
Read along to find out more before you invest in one!
Renters insurance is a policy that helps a tenant or renters safeguard their finances by covering their assets and belongings against natural or artificial disasters.
Investing in renters insurance can cost as little as $14/Mo. on average and cost higher or lesser depending on your assets, location, and other factors.
These other factors can be-
- The type of house (apartment/bungalow)
- Financial position and history
- Insurance deductible
Insurance for renters covers electronics, furniture, clothing, and medical expenses from loss due to theft, fire, and other catastrophic occurrences.
Pros of the policy-
- Covers losses to personal belongings
- Protects belongings even when you travel
- Liability coverage
Cons of the policy-
- Does not cover floods and earthquakes
- Specific valuables require a separate cover
What Is a Renters Insurance?
A renters insurance is an insurance policy that covers a tenant and his belongings financially against artificial or natural calamities. While your building and its maintenance may be covered by your landlord or his homeowner’s insurance, your personal belongings are not in case of theft, calamity, or any unmentioned loss.
A renters insurance ensures your contents in case of damage, theft, vandalism, or wear and tear, reimbursing the damage costs.
Policyholders can easily confuse a homeowner’s insurance with renters insurance. But, first, you must understand that renters insurance doesn’t apply to your own house.
For questions about a homeowner’s insurance, you can read: Homeowner’s Insurance
How Much Does a Renters Insurance Cost?
Let’s get to the point.
You want to know how much you’ll incur for getting insurance as a renter from a brokerage or your favorite insurance provider. Unfortunately, the answer isn’t that simple.
There are many factors at play. Such as what is the personal property covered worth? How prone to calamities is your location? Or what is the crime rate of your neighborhood?
But as a baseline, we can tell that the cost depends heavily on where you live and how much coverage you need.
From an estimate by NerdWallet’s analysis, we can tell that insurance for renters would average about $168 per year or $14 per month. This estimate is based on a tenant with $30,000 in personal property coverage, $100,000 in liability coverage, and a $500 insurance deductible.
Comparing that to the cost of other insurances, you’ll find that renters insurance is quite affordable.
Factors Affecting Renter’s Insurance
Many factors affect the cost and validity of your renter’s insurance, and you should account for each one before getting your insurance. Such as-
What and How Much are You Covering
The more belongings covered under the insurance, the higher your premium. Renters insurance protects assets inside and outside the house, so the first step should be calculating your inventory value.
Choose a policy that reimburses your belongings’ cash value or replacement value as it costs significantly less to replace old, depreciated assets.
Find out how much it would cost to replace each item in the inventory. The total is how much insurance value you would require if you had to replace everything after a mishap.
You can also opt to bundle the insurance If you require auto, life, or health insurance and save more.
An insurance deductible is an amount you pay before an insurance company reimburses your amount in case of a mishap. The more deductible you’re willing to pay beforehand, the cheaper your monthly premium will cost.
Insurance companies set a premium based on the risk associated with you. In part, this assessment relies on where you live. For example, neighborhoods with higher crime, closeness to water bodies or faulty lines, and distance from a fire department or police station can all play a role in determining the renter’s insurance cost and coverage.
Type of House
An apartment is lesser expensive to insure than a ranch or bungalow because they’re generally compact and have safety alarms. In addition, less on-site management will decrease your renters insurance premium.
Premiums also heavily depend on the structure building maintenance. New buildings are less expensive to insure than older buildings.
Insurers will skim your credit history and debt before settling an amount. Similar to a loan, the more confident they are in your ability to pay your premium, the lower the risk involved.
What Does a Renters Insurance Cover?
A renters insurance will generally include three types of coverages; personal property (like in the case of theft), liability (in case of an accident), and living expenses (in case of a fire).
But let’s dive deeper.
Renters insurance covers your belongings such as electronics, furniture, clothing, and medical expenses from loss due to theft, fire, and other catastrophic occurrences. Buying an adequate insurance policy will replace all personal possessions in such an event.
If your rented apartment/home becomes uninhabitable after such an event, renters insurance covers costs like hotel bills and other reimbursements for personal belongings.
Abnormally high-value possessions such as diamonds or other valuables are covered if a renter adds a floater that provides additional coverage for costly valuables stolen or lost.
A renters insurance also protects its policyholder against losses from fire, lightning, vandalism, theft, explosions, storms, and certain types of water damage.
When to Invest in a Renters Insurance
When Asked By Your Landlord
A landlord’s insurance or homeowners insurance covers the building, structure, and grounds, but not your personal belongings. Therefore, homeowners insurance is not adequate to protect your belongings or safety.
Today, many landlords mandate tenants to purchase their renters insurance policies. It could be the landlord’s idea or a requirement from the landlord’s insurance company, helping shift some responsibility away from the landlord. Most landlords will also assist in finding and obtaining coverage if you don’t already have one in mind.
If You’re a College Student Living Off-Campus
College students living in a dormitory or on-campus are likely covered by their parent’s homeowner’s insurance. However, college students living off-campus need to get their own renters insurance.
This is more applicable for students living in a shared flat where theft or water damage happens frequently.
When You Own Many Assets in Your Rented Home
Even though a renter’s insurance can benefit people with fewer assets by taking care of the liability coverage and living expenses, it is more beneficial for policyholders covering the value of belongings of at least $100,000 in personal liability coverage.
When to Not Invest in a Renters Insurance
When Looking For Protection Against Floods or Earthquakes
Like homeowners insurance, renters insurance does not include protection against floods or earthquakes. So if you’re living in an earthquake-prone area, it is ideal to go for a separate policy, such as “earthquake insurance.”
If You Own the Property You Stay In
A renters insurance will be useless if bought for a house you own and stay in because the policy will simply be incapable of reimbursing any value or usability.
Pros and Cons of Renters Insurance
Yes, the cost of a renters insurance policy varies depending on the abovementioned factors. Yet, compared to other insurances available, it yields the highest returns on a small investment.
This makes it significant because most insurance policies either don’t have much to offer or can be too heavy on the pockets.
Covers Losses to Personal Belongings
A renters insurance policy saves you from losses to personal property, such as jewelry, luggage, furniture, and electronics. Getting insurance for these not-so-expensive goods might seem unnecessary, but all these goods can quickly add to a lot.
A typical renters insurance, for instance, covers losses to personal property from perils such as:
- Damages by aircraft
- Damages by vehicles
- Falling debris
- Fire or lightning
- Snow or hail
Again, it’s important to point out that the policy doesn’t cover losses caused by negligence or intentional doing. For instance, the policy will not cover the damage if you fall asleep with the gas stove left on, causing a fire.
A renters insurance covers personal belongings and protects a person injured while in your home or if you accidentally caused the injury. The liability coverage will cover court judgments and legal expenses up to the policy limit.
Protects Belongings Even When you Travel
A renters insurance covers your personal belongings, whether in your home, automobile, or with you in travel. Your belongings are protected from loss to theft or any other covered losses anywhere in the world.
To find out more about your policy, ask your insurance agent for details on the covered policy.
Does Not Cover Floods and Earthquakes
As mentioned earlier, a renter’s insurance, in most cases, will not cover any floods or earthquakes, which can be a bummer in case your location is prone to natural disasters. All the more, special insurance in these cases can be extremely costly.
Specific Valuables Require Separate Cover
The renter’s policy might not cover storing jewelry in your apartment. So, again, you might need to purchase a rider — a supplementary policy covering specific policies.
Despite the increasing number of renters in the USA, only 37% have renters insurance (PolicyGenius).
Renters insurance is often overlooked but can be a beneficial investment for any tenant living in a house owned by someone else. While a homeowner’s insurance might protect the landlord and his structure, a renter’s insurance is ideal for renters and their personal belongings.
It is also much more affordable than homeowner’s insurance. Check these stats out for reference:
- According to NAIC, the average cost of renters insurance is nearly $15 per month, while the figure for homeowners insurance is close to $101 per month.
- The average renter’s belongings are worth $20,000, according to the insurance company USAA.
The right renters insurance policy can effortlessly cover the net worth of your personal belongings.
If you’re looking for the most affordable renters insurance, check out STP Brokerage’s comparative tool and get an instant quote for renters insurance based on your ideal needs from top insurance carriers.
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