As you strike out into a fresh life in a new rental home or apartment, it’s not unusual to wonder about renters insurance and how much coverage you need. Maybe you even wonder if you need rental insurance at all?
Though renters insurance is not as prevalent as homeowner’s insurance (only about a third of renters in the U.S. opt for coverage of their possessions), landlords are increasingly requiring tenants to carry insurance. Fortunately, it’s more affordable than some think.
As you look at coverage limits and deductibles that impact renters insurance premiums, here are some considerations to keep in mind.
1. Personal property coverage
Many people don’t realize the full value of their personal property, but every item adds to the grand total. In fact, some insurance companies estimate the average person has $35,000 worth of personal property.
If an apartment building or rental house is knocked down by a tornado or burns to the ground, the landlord’s insurance policy may only reimburse a fraction of that, if anything. With the average renter’s insurance premium being under $20 a month, protecting your personal property with insurance may be both prudent and cost-effective.
2. Liability and assets
Renters insurance also protects against liability issues, such as injuries to guests while visiting or even you damaging someone else’s property. If someone gets litigious with you, renter’s insurance can offset court costs and potential settlements. It can also protect your assets, such as investment accounts or savings. Therefore, in determining the limits for liability coverage, it’s advisable to at least equal the value of all your assets.
3. Supplemental coverage
Some situations that lead to loss or damage to personal property are not covered in a standard renters insurance policy. For instance, floods and earthquakes are rarely an inherent part of coverage. This is where supplemental policies may come in handy, especially if your rental lies in a zone with high risk of flooding or is near a fault line.
Supplements can also help cover high-dollar items that would not otherwise have complete protection due to policy limits, such as jewelry or high-tech electronics.
4. Safety issues
Renters insurance premiums are affected by the overall safety of the rental property. Insurance companies interpret safety issues in two main ways.
First, the location of the property indicates how prone it is to break-ins or vandalism, with “good” neighborhoods garnering better rates than more questionable areas.
Second, the condition of the rental property itself presents a different type of safety issue. An older home, for instance, may be more susceptible to electrical fires or busted plumbing.
Tip: Complete a home inventory of your possessions to best determine how much renter’s insurance is really needed. Software and even mobile apps are available to help. Such an inventory not only helps you determine the actual or replacement value of your personal property, but also documents your possessions in the event of making a claim for loss or damage.
While you may be tempted to accept a higher deductible in return for lower premiums on renter’s insurance, this is not necessarily the wisest choice. If you experience loss or damage with a price tag that is equal or beneath your deductible amount, your renter’s insurance does absolutely no good. With higher losses or damages, the out-of-pocket costs to you may be more than you can comfortably afford.
Aim to strike a balance between good prevention as is reflected in your premium and what you can reasonably pay on your end when making a claim.