5 Renter's Insurance Coverages With Examples of How They Work
5 Ways Renter's Insurance Can Save the Day So You Can Go on Enjoying It
For renters, insurance isn't always a top priority, in fact it may rank up there with getting alien abduction insurance for some people. It seems like an extra cost that doesn't make a lot of sense especially if you just finished paying for arranging your move. By the time you get settled in, it is easy to forget about the insurance. There are many reasons a renters insurance policy is an important part of protecting your financial security here are renter insurance coverage examples and details about what is covered by renters insurance to help you understand if it is worth it.
Why Is Renters Insurance Important for You?
The basic coverages for renters insurance are:
- Your contents or personal belongings at home
- Contents or personal belongings away from home
- Your Personal Liability (which works the same way as liability in homeowner insurance)
- Medical Payments to Others
- Additional Living Expenses — the actual loss you end up paying for a place to live while your insured apartment is being repaired or is unlivable due to a claim Read about John and how this coverage helped him maintain his independence in point number 5.
How Renters Insurance Insures Personal Property and Other Stuff
If you rent an apartment or condo, renters insurance is most important for you because you are placing all the things that you most value in one place. Your contents coverage will include things like your mobile devices, electronics, your bike, your favorite jeans, or just about anything from your shoes to dishes and furniture. It will cover everything you own (subject to special limits of the policy of course).
Some people underestimate the value of their contents or things they have in their home, but even with a minimalist lifestyle, you will have certain special items and things, including those related to hobbies or collections that you've taken the time to be selective about having.
How Much Should Renter's Insurance Cost?
In case you're wondering how much renters insurance costs, we've also put together the information you need at the end of this article and why you'll want to shop around, in general, you can expect to pay about $15-20 a month for basic starters rental insurance.
Renters Insurance Will Insure the Things That Happen Beyond Your Control
According to a recent survey, 61 percent of 18-29 year olds don't purchase renters insurance because they think that they live in a secure property.
Security Isn't the Only Reason for Insurance Claims
Even if you aren't worried about theft, consider other things that may happen beyond your control. Are you prepared to cover these costs and inconveniences?
Example of Water Damage: The 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, all of a sudden a piece of your ceiling cracks open and water starts pouring in, right over your TV and all over all your electronics. You grab your cell phone before the water reaches it and call your landlord who isn't answering the phone. You run upstairs to your neighbor's and no one is answering. You finally decide you should call your insurance to find out what to do. They get an emergency water damage control team over to help you.
Because you have renters insurance:
- they will help with the cleanup,
- they will pay for your additional costs of living since your apartment is unlivable due to the extensive damage,
- they will take care of compensating your loss or damage to your tv and personal property damaged in the incident
Without renters insurance, you would have been left on your own to deal with all of it. In addition, you would have probably been in a dispute with your neighbor or landlord trying to find someone to compensate for your loss.
With an insurance policy, you've got yourself covered and if you have replacement insurance, you'll even end up with a new TV and all that other stuff that got damaged could be fully replaced.
When all is said and done, you ask your insurance what happened, why did the water come down like that? Apparently, the neighbor's toddler had turned on the bath and they hadn't noticed, they went out to run an errand and within less than an hour your ceiling was coming down.
This is a situation beyond your control that there is nothing you could have ever done to predict it. Maybe toddlers don't turn baths on all the time, but water damage claims are major problems and can happen easily when you live in buildings where you can't control the actions of others or the repairs in the building.
Renters Insurance Will Protect You From Three Kinds of Things:
- Things that happen to your things: Your cell phone, your furniture, your laptop, basically almost anything that's movable that you own in your rented apartment and condo
- Things that may happen to you because someone is holding you responsible for something like a personal injury or property damage — read an example of this in point number 4 below.
- Things that happen because of a covered loss. Like having to find a new place to live because of a fire or bathtub incident, and then having to pay additional costs above and beyond your normal costs of living.
A renter's insurance policy will provide coverage for specified perils on your policy which will list the risks you are covered for, or may also provide 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 excluded.
You can choose if you want a named perils policy or an all-risk policy based on your budget and needs. Read more about perils and risks covered on an insurance policy here.
If someone holds you responsible for an injury on your rented premises, your rental insurance will cover your costs of defense, and also offers interesting coverages like voluntary medical payments.
How Renters Insurance Provides Coverage When You Travel
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.
Renters Insurance Can Protect Your Future Earnings: Liability Coverage
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.
How Rental Insurance Takes Care of Problems So You Can Enjoy Your Life
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.