Your landlord may be helpful and take care of all your problems, such as a leaky faucet or a broken appliance. However, your landlord may not be kind enough to replace all your belongings if your apartment catches fire. The same goes for the landlord’s insurance company. In the event of a fire or theft, you’re on your own. Fortunately, there is a solution. Tenant’s insurance. And it may be more beneficial than you think.
The concept of renter’s insurance
Most people think of renter’s insurance as personal effects insurance. It covers anything that has accumulated over the years, including furniture, clothing, jewelry, pots and pans, electrical appliances, bicycles, and even small decorative items on the shelves.
These problems are covered by the tenant’s insurance.
- Accidental spillage or overflow of water or steam
- Falling objects
- Fire or lightning
- Sudden accidental damage due to a short circuit
- Sudden and accidental breakage, cracking, ignition, expansion, etc.
- Acts of vandalism
- Motor vehicles
- Volcanic eruption
- Ice, snow, and slush Weight
- Storms and hail
You may have noticed that two major natural hazards are missing from this list. These are earthquakes and floods. If you want to protect yourself from these hazards, you should look into earthquake and flood insurance for renters.
What insurance coverage do renters need?
Choose a coverage amount for personal property. This is the maximum amount the insurer will pay if your personal property is damaged or destroyed as a result of an insured event (for example, a fire).
For example, you can choose $20,000 to insure all of your belongings. If you have a lot of property, such as expensive furniture or clothing, you should choose $100,000 or more.
A good way to determine how much personal property you need to insure is to take an inventory of your home. A good home inventory can be as simple as a written list, or you can use a cell phone app or video. Then estimate the replacement value of your belongings.
Consider the actual current value and the replacement cost allowance.
When you purchase renter’s insurance, you can choose between actual current value (ACV) and replacement cost coverage. Replacement cost coverage is more expensive, but better because it does not take into account depreciation.
For example, let’s say three years ago you bought a new television set with the latest technology for $2,000. If the TV is damaged today in a fire, ACV will pay for the loss in value of the TV. With replacement cost insurance, the damaged TV is replaced with a new model similar to the current price.
Be aware of special limitations.
Some policies have “special limits” or “sub-limits” for certain types of damage. For example, rental policies usually have a special upper limit for stolen jewelry (e.g., $1,000); for a necklace worth $2,000, this sub-limit is not sufficient.
Plan to insure expensive items such as jewelry, artwork, musical instruments, and antiques. This will ensure that in the event of theft, the value of these items will be reimbursed.
Don’t forget liability insurance.
When renting, it’s easy to focus on the physical things you own. However, renter’s insurance includes important liability insurance.
Liability insurance pays if you injure another person or damage property through no fault of your own. For example, if you throw a baseball through your neighbor’s window, the insurance will pay to replace the window.
You can choose the amount of liability coverage. Tenants’ liability insurance is usually $100,000, but you can buy more than that. As a general rule, you should purchase liability insurance that covers potential losses you may incur in the event of a dispute.
A good way to add liability insurance is to purchase roof insurance that you can include in your tenant’s policy.
Can’t afford to live in an apartment? Consider the “extra living expenses.”
If you can no longer live in your apartment because of a problem covered by your insurance (such as a tornado), supplemental living expense insurance (SLE) covers extra expenses such as hotel bills, restaurant meals, and pet care. This coverage is sometimes called “loss of use.”
What renters insurance doesn’t cover
Home insurance does not cover damage to the building you live in. Landlord’s insurance covers the structure of the building. For example, if a fire damages the plastic siding on your building, your landlord’s insurance will cover it.
Tenant’s insurance generally does not cover accidents in common areas such as hallways and stairwells. The same is true for landlord’s insurance. If, for example, a visitor trips on an uneven sidewalk, the landlord’s insurer will handle the matter.
Damage to the apartment or furniture caused by pets is also not covered by rental insurance. For example, if your dog chews the coffee table or dirties the carpet, this is not covered by any insurance.
Renter’s insurance does not cover damage caused by floods, earthquakes, or landslides. If these problems are common in your area, you will need additional insurance.
How much does renters insurance cost?
According to the latest figures from the National Association of Insurance Commissioners, the average cost of renter’s insurance covering personal property worth between $26,000 and $31,999 is $182 per year.
That means that for about $15 a month, you can cover property, liability, and additional living expenses.
The cost of renters insurance generally depends on
- Where you live
- The level of coverage you choose
- The deductible amount
- The history of the renters insurance
- The presence of burglar alarms, smoke detectors, sprinklers, and security systems in the unit and building.
Check with your insurance agent to see if there are any discounts available. One way to save money is to combine auto and renters insurance.
Do I have to buy renters insurance?
If you can easily replace all your belongings after a disaster, it may not be worth spending money on home insurance.
However, keep in mind that renter’s insurance can also cover legal actions taken against you, including your legal fees. Not to mention the fact that if your home is damaged and you have to move elsewhere, you’ll have to cover the additional costs of loss of use yourself.
Even if you don’t have property insurance, don’t forget to insure your tenants in some other way.
Lily Poole is a Property and Home Insurance officer by profession. She is pretty well experienced in the manhattan renters insurance and accounting field and has an impressive profile in the training and development industry.