5 Renters Insurance Coverages With Examples of How They Work

5 Ways Renters Insurance Can Save the Day So You Can Go on Enjoying It

For renters, insurance isn't always a top priority. For some people, it may rank up there with getting alien abduction insurance—an extra cost that doesn't make a lot of sense. This can be especially true if you just finished paying for arranging your move. By the time you get settled in, it is easy to forget about the insurance.

However, there are many reasons a renters insurance policy is an important part of protecting your financial security. Here are some examples of what renters insurance covers to help you understand if it is worth it.

01
Why Is Renters Insurance Important for You?

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There are some basic coverages you can expect with most renters insurance policies. Coverage includes:

  • Your contents or personal belongings at home
  • Contents or personal belongings away from home 
  • Your personal liability (similar to the liability in homeowner insurance)  
  • Medical payments to others
  • Additional living expenses, such as the actual loss you end up paying for a place to live while your insured apartment is being repaired or is otherwise unlivable due to a claim

How Renters Insurance Insures Personal Property

Renters insurance will help protect all the valuables that you store in your home. Your content coverage should include things like your mobile devices, your bike, and just about anything else—from your shoes to dishes to furniture. It will cover everything you own (subject to special limits of the policy of course).

Some people underestimate the value of their belongings, but even with a minimalist lifestyle, you will have certain special items that you value. Think of any hobbies or collections that you'd be upset to lose in a burglary.

How Much Should Renters Insurance Cost?

According to the Insurance Information Institute, rental insurance in the U.S. cost an average of $180 in annual premiums in 2017. That means you can expect to pay $15 per month, but you'll want to shop around to ensure you're getting the best price for your area.

02
Renters Insurance Isn't Just for Theft Protection

Overflowing bathtub in apartment condo causing damage
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According to a recent survey, 61% of millennial renters don't have insurance because they think that they live in a secure property. 

Even if you aren't worried about theft, renters insurance covers many other situations that could apply to renters in any area. If you don't have insurance, are you prepared to cover these costs and inconveniences out of pocket?

For example, if someone holds you responsible for an injury on your rented premises, your rental insurance will cover your costs of defense. Some policies offer interesting coverages like voluntary medical payments.

A renter's insurance policy will provide coverage for specified perils. Your policy will list the risks you are covered for, or it may state that it provides coverage for all risks. An open perils or all-risk policy will cover you for almost anything you can think of, as long as it is not specifically excluded.

You can choose if you want a named perils policy or an all-risk policy based on your budget and needs. Either way, it's important to understand the perils and risks covered by your insurance policy.

Example of Water Damage: Bathtub Incident

Imagine you are sitting in your living room watching a movie and all of a sudden you hear dripping water. You head over to the faucet in your kitchen to see if maybe you left the tap open. No such luck. You listen to hear where the noise is coming from, and as you walk towards your living room, a piece of your ceiling cracks open and water starts pouring in. Your TV is soaked along with all nearby electronics. You grab your cell phone before the water reaches it and call your insurance to find out what to do. They get an emergency water damage control team over to help you.

Because you have an insurance policy:

  • they will help with the cleanup
  • they will pay for you to live in a hotel during remodeling
  • they will compensate you for losses or damages, such as your TV

Without renters insurance, you would be on the hook for all this. You might also find yourself in a dispute with your neighbor or landlord as everyone scrambles to find someone to compensate them for losses.

This is a situation beyond your control that there is nothing you could have ever done to predict it. Water damage claims are major problems that can easily affect renters who live in multi-unit buildings with strangers.

 

 

03
How Renters Insurance Provides Coverage When You Travel

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Perhaps one of the most underrated coverages that renters insurance can provide you with is security and protection when you travel.

In order to be sure you have this coverage, ask your insurance broker to confirm to you the limits of insurance for contents off-premises, and when you travel.

Some policies will cover you up to your contents limit when items are temporarily removed, while others may limit your coverage to the insured premises. If you travel you want to make sure you have the full coverage included. This can save you money on baggage insurance costs, or other travel insurance costs on trips. Just keep in mind that you may have to pay a deductible.

Liability for Your Actions Worldwide

When you are traveling and renting rooms in hotels or even home-sharing like in Airbnb rentals, you can be held responsible for damages to property.

Yes, you usually have to leave some kind of small deposit, but this deposit will not cover you if you cause a fire, water damage, personal injury or other situation where you are being held responsible for lost earnings of a vacation rental, or property damage on a major scale.

You can control small damages from happening by being responsible and cautious, but usually, the larger incidents which cost the most are the ones that happen by pure accident. Your liability coverage can protect you if you are being sued for your actions worldwide. 

Theft or Lost Items While Traveling

A lot of times we like to travel light, but we are still likely to be carrying a few thousand dollars of items with us. When you travel any number of things can go wrong, but one of them is if people steal your belongings.

Get Help If You Lose Things While You Travel

A backpack can easily contain thousands of dollars in digital camera equipment, tablets, phones, and mobile devices. Add to that some personal belongings and your whole trip could be ruined if you didn't have the help to replace the items. Renters insurance can help cover these things and if you have replacement cost insurance, you'll be able to replace the items and get on with your trip without worrying. 

If you have an all-risk policy, crazy situations like dropping your backpack in the ocean during a sightseeing tour could also be covered. Believe it or not, these kinds of things do happen, sometimes it's just a cell phone that flies out of your hands, but its good to know if the coverage is there that you could use it. If you have a named perils policy, then you would be out of luck. Be sure and ask what perils you are insured for before a trip, only your insurance representative will be able to explain the specific details of your renter's insurance coverage while traveling because each insurance policy is different, these are just examples of what you might be able to get.

What About the Mysterious Disappearance of Items?

Imagine you leave your digital camera and all your lenses in your room while you head out for a quick bite to eat. You come back and everything is gone, but there is no sign of a break-in. You question whether maybe you brought it with you to the restaurant. You aren't sure if someone took it from your room, and now you aren't sure if maybe you forgot it on a bench somewhere. Although this coverage isn't included with all renters policies, if you ask for an all risk renter policy, even things like this might be covered without a hassle. Ask your broker or agent about the coverage on an all-risk policy especially if you travel.

Another Example of Mysterious Disappearance:

You go to the beach and are swimming in the ocean when you get back to the hotel room, you notice your necklace is missing. You don't know what happened, did it slip off in the water, did someone pull it off you in a crowd? This could also fall under mysterious disappearance subject to the policy limit for jewelry and the deductible.

Actual Value vs. Replacement Cost Coverage in Renters Insurance How Claims Are Paid

Tip: Once you decide to purchase renters insurance it is important to ask your insurance company if your policy will be on an Actual Cash Value Basis or a Replacement Cost basis. The word cash is misleading, it doesn't mean you will get enough cash to cover replacement. So remember to discuss the limits in your policy and the basis of claims settlement with your insurance representative. Replacement cost will give you money to replace or repair items, the actual cash value will only pay the market value of the items at the time of loss, that's a depreciated value (like a garage sale price) and will never give you enough to replace the item. The definitions may vary from state to state, so be sure and check the details of your renter's policy.

04
Renters Insurance Can Protect Your Future Earnings: Liability Coverage

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One of the things people least frequently think about is the potential loss to the things we do not yet own or have. Did you know that if you get sued and are held responsible for serious personal injury or damage, that even if you do not own anything, if you have a career or are a student who promises to earn money in the future, that the court may make you pay out of your future earnings?

Liability Insurance From Renter Insurance May Protect Your Future Earnings

The liability portion of the renter insurance for your rented condo or apartment would also provide help with legal defense. The costs associated with this are extremely high, so it is worth having this kind of protection, especially when you are working hard to build your career. 

Example of How Renters Liability Helps Protect Future Earnings and Investments When You Have No Money

You get invited to a golf tournament with your friends. You hit the golf ball and instead of making that hole in one, you end up sending your ball over a hedge where suddenly you realize you've hit someone in the face. They suffer no fatal injuries but the impact damages their eye and creates a problem with vision. They will no longer be able to practice in their career and as the main provider for their family, the impact is devastating to their financial well-being. Guess who is responsible? Your renter's insurance personal liability will help defend you and pay costs if you are held liable. 

If don't have any significant assets, and you aren't able to provide financial compensation of any significant amount, without liability insurance the court will go after your future earnings and any existing assets. However, if you have renters insurance with liability, you avoid all of this. It is bad enough you feel awful for this horrible accident, why add to it a lifetime of payments? 

The Bathtub Incident Reversed 

Now let's say you aren't worried about injuring people. Remember the case of the overflowing bathtub? Well, imagine this was your bathtub that overflowed. That for some reason while you were filling the bath, you got an urgent phone call and something happened to make you totally forget you were running the bath. The liability portion of your insurance would help cover you if your neighbor held you responsible for damage. Maybe this kind of damage doesn't seem like a big deal, but if you suddenly got a bill from your landlord for:

  • the cost of repairing the ceiling and the floors in two apartments
  • replacement of the damaged items in the neighbor's apartment
  • Lost rental income while the apartments were uninhabitable

...you might be wishing you had spent that $15-20 a month on renters insurance.

05
How Rental Insurance Takes Care of Problems So You Can Enjoy Your Life

Couple enjoying time together in rental apartment
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We've talked about how your personal belongings are covered by renters insurance as well as some examples of liability risks, here's how renters insurance can help protect your peace of mind when something goes wrong.  

There is nothing more stressful than living through a crime like a theft, or having an incident happen in your building for which you weren't even responsible, like a fire, or the bathtub incident... yet you find yourself on the street and paying the consequence of someone else's negligence

Having Renters Insurance Puts You In Control of Your Life and Allows You to Be Independent

If you have renter's insurance you can maintain a level of independence without having to ask friends and family for help or handouts while you get back on your feet. 

Example of Additional Living Expenses Helping Maintain Independence: 

John was living in a rented condo, one night he heard a big snapping sound and next thing you know the condo was on fire. He had to run out in the middle of the night, half his personal belongings were gone and he now had nowhere to stay. He thought about calling friends or parents, but he didn't want to put anyone out in the middle of the night. When he called his insurance emergency claims they let him know he had coverage for additional living expenses and helped him find a place to stay for the night, and while his rental was being restored. This allowed John to maintain his independence and privacy instead of moving in with friends or family. He didn't feel like he was burdening anyone because he was in control of his living arrangements and situation.

Get Legal Support and Defense When You Need It

If something is going wrong and you need help, renters insurance can come to your defense, for example, if someone sues you for damages you have caused or personal injury. Renter's insurance won't provide the same extent of coverage as legal insurance, but it will come to your defense if you're being sued for your actions at home, or worldwide through the liability coverage.

Replacing Lost, Damaged or Stolen Items Is Expensive

We have a false sense of how little the things we own are worth. In the Bankrate survey cited above:

43 percent of 18-29 year olds said the reason they didn't have insurance is that they don't have enough property to insure. 

Most people do not realize how much it costs to replace things until they have a major loss. 

Data information* processed from claims over a 12 month period from 2015 to 2016 showed:

  • $760,000 were paid in claims for tablets/iPads
  • 4.6 million were paid for Jeans
  • $870,000 were paid for sneakers
  • $1.4 million were paid for bikes *Enservio data 

These are very basic things that we all have in our homes adding up to millions of dollars in paid claims. 

All of the above are reasons make a pretty good argument to get renters insurance. Whether you are more interested in liability coverage, or in insuring your tech and other personal property. There are different levels of rental insurance that you can choose from. Remember to ask for all risk coverage with replacement cost if you want the best coverage. 

The Bottom Line

The information in this piece is meant to provide an overview of renters insurance. The general principals, examples, and tips here should help you understand your options, but coverage varies from state to state. It's important to speak with an insurance professional to find the best coverage for your needs.