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  • Writer's picturejoseph retcho

What Is Renters Insurance

Updated: May 12, 2023

room with personal belongings

Many tenants are unaware of how much their valuables could be protected by an insurance policy in the event of a life-changing occurrence like a fire or theft. You're wrong if you believe that your landlord's insurance policy will cover damage to your belongings in your rental home. Rental property owners typically only buy enough insurance to fix or replace their buildings. It is up to you to insure your personal property.

Your landlord might show sympathy if you lose personal property, become a victim of theft or fire, but he or she might not be obligated to replace your belongings.

The same general personal property coverage is provided by both home insurance and renters insurance. It aids in preventing losses due to accidents like burglary, fire, lightning, vandalism, windstorms, and water damage from burst water pipes.

Up to the limits of your policy, your renters insurance will typically assist in covering some of the costs associated with finding temporary housing for you if your rental home should become uninhabitable. Over and above your usual expenses, this benefit typically covers the cost of meals.

Even though renting a home remains a common lifestyle choice, not many tenants recognize the value of renters insurance. In 2014, 37 percent of all housing units in the United States were occupied by renters. Unfortunately, the majority of the residents lacked renters insurance. Only 41% of tenants had renters insurance, according to a 2016 survey done for the Insurance Information Institute.

Some renters believe they don't have enough valuables to warrant purchasing insurance. They are unaware of the easily astronomical costs associated with replacing clothing, furniture, computers, TVs, and books.

Comparing the actual cash value vs full replacement

Whether to purchase an actual cash value renters insurance policy or a policy that covers the full cost of replacement is a crucial decision for consumers.

When an item is covered for its actual cash value, the insurer will depreciate it based on how old it is. The cost of purchasing a used couch of comparable age and condition would be the actual cash value, for instance, if your 10-year-old couch was stolen.

If your policy provided full replacement coverage for your couch, your insurer would pay the price of a brand-new couch of comparable quality without taking depreciation into account.

Coverage for Renters' Liability

Renters insurance is more than just a means of property protection. It may protect you from lawsuits based on claims of negligence. Similar to homeowners insurance, renters insurance covers your legal responsibility for any harm you, your family, or your pets may cause to another person's person or property.

For instance, you might be held liable for someone's injuries if you hosted a party where they slipped and got hurt. However, if you are found to have been negligent and caused the injury, the liability section of a renters policy would pay for your legal damages, up to your policy limits. In this case, the insurance would also cover your defense in court.

Make sure the liability limit on your renters insurance policy is high enough to protect your personal assets.

What Will the Cost of Your Renters Insurance Policy Be?

Renters insurance policies are reasonably priced for the extensive coverage they provide. In the United States, the average yearly premium in 2014 was $190. Renters only need to purchase contents insurance to protect their homes, so the cost is low.

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