What Do I Need to Know About Renters’ Insurance?
Although 35 percent of the U.S. population rents their home, a whopping 7 in 10 renters don’t have a renters’ insurance policy. PolicyGenius cofounder Francois de Lame says that renters are often hesitant to purchase a policy even though it’s often in their best interest to do so. Do you rent? Should you purchase a renters’ insurance policy? Read on as we break down the essential facts about renters’ insurance with Francois de Lame.
What is renters’ insurance?
De Lame explains, “Renters’ insurance is designed to protect people who rent an apartment or house. It is a cost-effective way to insure your belongings against unforeseen events. Renters’ policies can protect against weather events (such as wind, rain, heavy snow and lightning) and losses related to fire, theft, smoke and vandalism. It’s worth noting that renters’ insurance typically does not cover against naturally caused floods. A renters’ insurance policy can also cover living expenses if you’re temporarily displaced and third-party medical expenses if an accident occurs in your home.”
Simply put, renters’ insurance is designed to protect renters. So why do so few renters actually have it? De Lame says there are two main myths at work that discourage renters from purchasing it.
Myth 1: It’s too expensive!
Consumers generally overestimate the cost of most types of insurance, including renters’ insurance. De Lame explains, “Renters’ insurance is some of the best value insurance you can buy. A typical policy will cost between $15 – $20 per month.”
Myth 2: My landlord has insurance in place to protect my belongings
De Lame explains, “Your landlord’s policy generally protects against any structural damages that occur to the building as a result of unforeseen events and disasters. It won’t cover your belongings against these same events. So if your apartment floods, a landlord’s insurance would cover repairs. However, any damages you incur, including having to move out, will likely not be covered.”
If renters’ insurance is a brand new purchase for you, it can seem like an intimidating process to take on. So, if you’re in the market for a renters’ policy, what steps should you take to make the search less intimidating?
Step 1: Value your possessions
“To start, you’ll need to calculate the amount of personal property coverage you need,” de Lame explains. “The Insurance Information Institute provides a great tool to help you estimate the value of your possessions. It is always a good idea to take photos of the expensive items you own. This can come in handy if you ever need to make a claim.”
Step 2: Understand important features
According to de Lame, there are four main features you’ll want to look for in every policy.
- Replacement coverage versus actual-cash value coverage. Policies with replacement coverage will reimburse you for the full cost to replace an item. Actual-cash value coverage, however, will reimburse you for the depreciated cash value of an item.
- Limits on coverage. Most insurers have limits on items such as jewelry, watches, fine art, musical instruments, firearms, cameras, silverware and computers. For some items, you can purchase an additional rider or floater to extend your coverage.
- Off-property coverage. Some insurers limit coverage on your possessions when you take them off-property. Check to see how they cover expensive items, particularly laptops and jewelry.
- Discounts. Many insurers will reward you with a lower premium for protecting your home. Make sure to note on your application any security measures you have (for example, alarms, smoke detectors and dead-bolts), as this may lower premiums.
Step 3: Shop for a policy
If you have car insurance already, de Lame recommends starting your search there. “Your existing car insurer may offer you a discount. Otherwise we recommend looking at TopTenReviews to understand how policies differ between insurers.
Financial strength and security is also essential when looking for an insurer. “Always check the financial strength of an insurer. A.M. Best is the industry leader in evaluating how financially sound an insurer is. A good rule of thumb is to pick an insurer with at least an A- rating. Most meet this criteria but some are better than others.”
Once you’ve purchased a policy, don’t forget about it. “Make sure to review your coverage yearly and update your policy if any big changes occur to your possessions (i.e., jewelry purchases).”