Who might need renters insurance?
While it may seem obvious that anyone who rents an apartment, condo, or home needs renters insurance, they are not the only candidates. It is not a requirement that you pay rent to another party that qualifies you to obtain a policy.
This type of policy is for someone who lives in a space they do not own and is not related to the owner or tenant. At first, this can seem unclear, so let’s explain by including some examples.
If you are the person renting the unit (apartment, house, condo, etc.), then you qualify for renters insurance. If you are related to the tenant, then you are covered by the renter’s policy. Examples include a spouse, children, parent, sibling, etc. If someone is legally in the family tree by birth, marriage, or adoption, they are covered by the tenant’s renters policy.
Have you moved in with your BFF for whatever reason? Whether you pay rent or not, you and your property will not be insured by their policy. A renters policy for you will solve that problem.
Your boyfriend or girlfriend has moved in with you and brings all their belongings. They are not covered by any existing renter’s policy that may be in place. You can talk to your agent about adding that person to the policy, or they can get their own policy.
The following section will describe what a renters policy covers, so ensure that you still have enough coverage if you add someone to an existing policy.
What is covered?
Most renter’s policies have three categories of coverage. Specifically, it will cover your personal property, provide liability coverage, and cover additional living expenses if you temporarily cannot live in the unit you are occupying.
Like any other insurance policy, to make a claim, there must be an event that the insurance company covers. Common events include fires, broken water pipes, or damage from a leaking roof during high winds. Typically, there will be coverage if something you own is vandalized or stolen.
Insurance carriers can differ in how they describe what events qualify. Still, typically events that are out of your control or are accidents are often covered. Let’s review the three categories in more depth.
This type of property includes your furniture, clothing, kitchen cookware, TV, and other electronics. An item is considered personal property if you can pick it up and move it around. So how much personal property coverage should you include with your policy? That depends on how much “stuff” you want to be covered.
If you just moved away from home and have your first apartment, you likely have less personal property than a family of four renting an entire house.
The best option is to take inventory of your personal property and estimate how much it would cost to replace everything. That is how much personal property coverage you should request when getting quotes.
To use an exaggerated example, if you only include $10,000 in your policy and all your belongings are destroyed in a fire, could you replace them all? If you learn after the fact that it will cost you $30,000 to cover everything, you will only receive ten thousand dollars.
On the other hand, if you include too much coverage, then you are paying more than you need to for coverage you will never be able to use. A good exercise is to take a video of each room and estimate what it would cost to replace those items.
You do not need to get down to the penny; you need to get “close enough.” If you want to increase the amount of protection you purchase as a “cushion” or “margin of safety,” that’s a decision you can make after you get a quote.
What if you are living in a furnished unit? That means you do not own all the items, yet they are still considered personal property. If your lease agreement makes you responsible for the personal property included with the unit, then your renter’s policy will cover those items. Discuss this with your agent during the quoting process to ensure this gets appropriately insured.
This portion of the renter’s policy will provide coverage for you if someone is injured, and you are legally responsible. This coverage extends beyond where you live and follows you wherever you travel.
The amount of liability protection typically starts at one hundred thousand, and you can often increase that amount. The increase in cost is usually very little compared to the amount of coverage offered.
If your dog bit someone and you were sued, it’s your liability coverage that would be used. Both legal fees and potential judgements are picked up by your carrier through the liability portion.
If you want an umbrella insurance policy, you may be required to have a higher amount of liability insurance on your renter’s policy. This is known as your underlying coverage, and can vary depending on the insurance company.
Additional living expenses
If where you live is damaged by a covered event, like a fire or broken water pipe, you may need to live somewhere else while repairs are completed. That often creates additional expenses above and beyond your typical day-to-day costs. If you temporarily move into a hotel, that is an additional cost.
If you eat out more often because of not having a kitchen, that additional cost will be included. If you must drive further to work due to the temporary housing, that can also be covered. It is important to note that not all these costs are covered, only the increase in the cost.
The entire hotel bill that exceeds your rent will be covered since that is a new cost. If your monthly rent is $850, then everything exceeding $850 will be covered. If you are still required to pay rent while repairs are completed, your entire hotel bill is covered.
If you usually spent $200 per week for food and now you spend $300 because you must eat out more often, the extra $100 would be covered. If your commute is longer due to your temporary housing, the extra fuel cost would be covered, not your entire fuel cost.
Discussed previously was personal property and that you can choose the amount of coverage you want based on the inventory or your belongings. For some items you own, there can be limits on the amount the insurance company will pay if lost or damaged.
You may have an expensive piece of art or a fine piece of jewelry that would be very expensive to replace. Many policies will limit the amount of coverage to $2,500 regardless of what that item may be worth.
A portrait painted by your Aunt Edna and a portrait painted by Van Gogh will have very different values. Because the value of these belongings can vary, insurance companies have a cap on how much they pay out.
However, you can add specific items to the policy with an appraisal from a qualified source. Suppose the Metropolitan Museum of Art curator verifies in writing that you own a Van Gogh painting and estimates its value. In that case, the insurance company will accept that as confirmation.
If Uncle Bob hands you a handwritten note with his estimate of Aunt Edna’s painting, that estimate of value will not be held to the same level of acceptance. The same would apply to the value of a piece of jewelry. While you may have a number in your thoughts regarding the value of Grandma’s engagement ring, a certified jeweler appraisal is needed from an insurance company’s perspective.
You can have these items added to your policy, and each item will be charged an amount to insure in full. You can learn more in our article “How should I insure my most valuable things.”
Renter’s insurance is very inexpensive, so while there are ways you can save money, the list is not as long as a homeowner or car policy. For example, if you bundle your car and renters policy with the same insurance company, there can be more significant savings on your car policy.
It is not uncommon for the savings on your car policy to be more than the cost of a renters policy. In that situation, not only are your personal belongings covered, you have added liability protection, and your car insurance expense can go down.
Many companies will provide you with a multi-policy discount, so ask your agent. Other potential discounts will be offered to those folks with no history of making claims or if you are willing to receive communications via email rather than snail mail.
Is renters insurance expensive?
We mentioned earlier that renters insurance is very inexpensive. The most significant factor that can move the cost is the amount of personal property you include in the policy. Do you have all your worldly belongings after graduating from college in a studio apartment? Or do you have a family of four renting a home?
Are you including the Van Gogh painting discussed above in your policy? Or are you proudly displaying your child’s elementary artwork on the fridge? The amount of personal property you include and the volume of highly valuable items you add to a policy will increase the total cost.
But to guide you, the policy for the studio apartment with nothing else being added could be less than $150 for the year. And if you combine that with a car policy, the discount you receive for bundling can exceed that amount, meaning you got the renters policy essentially for free.
The cost will increase for a family of four, but it will not be as expensive as a homeowner’s policy because you are not insuring the structure, only your personal belongings. Other factors are involved when getting any insurance policy, like your history of claims and your credit profile, so the above number of $150 is a moving target and will vary from one insurance company to the next.
We included that as a guide so that no one thinks the cost will be thousands of dollars. For the value, everyone who does not own the space they occupy should have one of these policies.
What is not covered?
Like every other insurance policy in existence, it does not cover everything. A life insurance policy will not pay for damage to your car. Your health insurance will not pay to replace your stolen iPad. Your renter’s policy will not pay for your personal property for every circumstance.
The following sections will review events that are excluded from the policy. Please note that this is not a complete list, so just because it is not listed here does not mean you have coverage. These are the most common exclusions from coverage, and each insurance company will have its own list, so make sure you ask your agent about exclusions.
Roommates’ belongings – If you have a roommate unrelated to you, your policy does not cover their property. Their property is not covered if you live with a boyfriend or girlfriend. Remember that your policy only includes a value for personal property that you determine at the time you purchase the policy.
Roommates should have their own policy for all the reasons already discussed. Some folks have been partners for a long time and split the cost of living expenses, and their cars are registered to the same address.
If it can be documented that the relationship is more than a “live-in friend,” the insurance company may add the partner to the renter’s policy. But do not assume that your definition of “partner” automatically includes that person on your policy. The idea of “love at first sight” and “happily ever after” are lovely, but most insurance companies desire more proof of history before allowing someone to be added.
Flood – Most of us think of a flood and imagine a river or lake rising over its banks and causing significant problems for a wide area. While that is a flood, the impact area does not need to be that large. The definition of a flood is:
“A general and temporary condition of partial or complete inundation of 2 or more acres of normally dry land area or two or more properties (at least 1 of which is the policyholder’s property)”. We suggest you read the article on the Federal Emergency Management Agency flood description website.
It is essential to point out “2 or more properties” in the previous section, and the property size is not part of the definition. If you live in a residential neighborhood of any kind, and a pool of water collects in your yard and your next-door neighbor’s yard, that is a flood.
Your renter’s policy will not cover any damage caused by this flood. You can purchase a flood policy separate from a renters policy, and the same agent with whom you have renters insurance should also be able to provide that policy. Further information is available at the FEMA Flood Insurance website.
Earthquake – Most folks know earthquakes are caused by underground shifts that often cause shaking on the earth’s surface. Renter’s policies do not cover damage caused by earthquakes, but that can be available as a separate policy, much like flood insurance. Some insurance companies allow you to add a rider for earthquakes instead of getting a separate policy, and your agent will be able to help you with that option.
Many policies include other events in this section, specifically mudslides and earth movements. An example is a home built on the side of a hill, and after years of slow erosion, the hill shifts. If these events destroy your patio furniture, there will be no coverage.
The same outcome for a mudslide impacting the structure where you live, any damage would also not be covered. In many areas of the country, this is not a serious concern. But if you live in an area that experiences frequent earthquakes, you need to factor this into your conversation with your insurance agent. Here in CNY, we are not concerned about earthquakes like in California.
Sewer and water backup – This is when the line going out of the house gets plugged, and the drain backs up. Or perhaps your sump failed and stopped working. Your renters policy will not cover damage in this scenario.
However, this is an example of coverage that can quickly be added to your policy. You can decide how much coverage you want; the more you want, the higher the cost.
Homeowner’s and renter’s policies have very similar exclusions to coverage, except that a renter’s policy does not cover any structure like a home or apartment building. More details are available by reading “What’s Not Covered by Your Homeowner’s Policy?”.
Purchasing a renter’s policy – next step
You now know what renter’s insurance covers and for what circumstances you should have. You should also know that there is no reason to overpay for this policy, yet many do. Many renters also buy watered-down policies, believing they are getting a great deal.
At Horan, we want you to have it both ways; excellent coverage and the most competitive price, and that’s why we offer policies through insurance carriers who can meet those criteria. If you are ready to see that for yourself, tap the Get a Quote button below, and one of our insurance pros will contact you ASAP.
Do you have additional questions that we have not answered? Let us know by completing the form below, and we’ll provide you with the information you need.