What is Renters Insurance?
It was my senior year of college and I was just moving back to school in late August before the first week of classes. Earlier that summer, in June, I had brought all of my furniture, a bunch of clothes, and a ton of other stuff to the house.
When I walked into my college bedroom, I couldn’t believe my eyes. Literally, 80% of my possessions were covered in mold and beyond repair. I didn’t realize how much stuff I had and valued until so much of it was destroyed.
After months of back and forth with the landlord and the renters insurance company, I walked away with only a fraction of the money that my stuff was worth. This was mainly because I didn’t have any renters insurance (which I didn’t even know existed at the time).
After that incident, I immediately signed up for a plan, but it wasn’t until several years later that I realized the true value of renters insurance and how to pick a good plan (one that gave me the coverage I needed at a reasonable cost).
Fortunately, you don’t have to make the same mistakes I did.
In this post, I’m going to break down what I never knew about renters insurance and share my opinion on how to pick the best plan.
What Is Renters Insurance and Why Do I Need It?
Since some events are completely out of your control, I think it’s a good idea to purchase renters insurance to minimize the financial impact of something going wrong.
Renters insurance or “tenant insurance” is a form of insurance that can protect you and your stuff against incidents that are not covered by the landlord’s insurance plan.
Just like you have health insurance to protect your health, if you rent an apartment, condo, or house, having renters insurance will help protect you and your stuff. It’s totally worth it. And it’s not as expensive as you think.
But before you go and buy your plan, it’s important to understand how renters insurance works, what’s covered, and how your renters insurance plan can best protect you and your stuff.
What Does Renters Insurance Cover?
A renters insurance plan typically includes a few different types of coverages and you’ll want to consider what works for you:
This type of coverage insures your personal items from incidents such as fires, theft, water damage or other potentially destructive events.
If you were found legally liable for someone else’s injury or property damage, this type of coverage can help cover the cost.
Incidental Dog Bites
You may be surprised to learn that some renters insurance policies may protect you should your dog accidentally bite another person. In most cases, the dog cannot be in a “vicious” category or have a history of attacking other animals or people.
When a covered loss or hazardous event makes your home temporarily unlivable, renters insurance can help cover the cost of relocation until your home is deemed suitable for living again. This coverage may be included in the plan, or available as an ‘add on.’
While all of these coverages are important, I want to focus on Personal Property since that is typically where you have the most options with your insurance plan.
What to Consider When Selecting Your Renters Insurance?
Now that you can identify the main types of coverage included with your renters insurance, let’s dive into the plan selection process.
Your landlord is typically responsible for damages, maintenance, and repairs in regards to your unit. However, I found out the hard way, they usually have no responsibility for your personal possessions or personal liability claims against you.
This is where renters insurance can help.
What is covered by your landlord’s insurance plan?
You have to learn the rules before you can play the game. There are tons of great resources online to learn more about landlord insurance plans, but that is outside the scope of this post.
After you understand what is not covered by your landlord, you can begin to fill in the gaps.
How much coverage do you want to purchase?
This is completely based on your risk tolerance and the value of your personal items. You can decide how much coverage is right for you, insure as much or as little as you want.
Just note that the more coverage you purchase, the more expensive your monthly premium will be. This is not something that I can determine for you, but you should at least be aware of the correlation between coverage and monthly premium before making your decision.
What incidents does your plan insure against?
Make sure you fully understand your renters insurance and its coverage details.
Depending on your plan, there may be certain incidents that aren’t covered and there may be differences between different companies, temporary relocations and a whole host of other factors.
Always do your due diligence before purchasing a plan. Thankfully, the best renters insurance companies, like Lemonade, make it super easy to see exactly what your coverage includes (because you choose it!) and how much it costs.
Best Renters Insurance Companies in Your Area
These companies have some of the best offers where you live. Some of these providers may offer the ability to compare multiple carriers at once.
Location-Specific Renters Insurance Guides
Like other types of insurance, Renters insurance can vary by state for carriers and the cost for premiums. Check out our guides below if you live in one of these locales.
- Brooklyn Renters Insurance Guide
- California Renters Insurance Guide
- Chicago Renters Insurance Guide
- Denver Renters Insurance Guide
- Georgia Renters Insurance Guide
- Maryland Renters Insurance Guide
- North Carolina Renters Insurance Guide
- New Jersey Renters Insurance Guide
- New York City Renters Insurance Guide
- Oregon Renters Insurance Guide
- Pennsylvania Renters Insurance Guide
- Philadelphia Renters Insurance Guide
- San Diego Renters Insurance Guide
- Texas Renters Insurance Guide
What is The Average Renters Insurance Cost?
Like any other type of insurance, renters insurance is just a safety net to hedge against a catastrophic event.
If your stuff is important to you, then you should consider protecting it. It’s also important to understand the financial impact of your decisions.
Every financial decision, no matter how small, adds up over time!
Let’s say you own $50,000 worth of insurable possessions and want reasonable liability and personal property coverage.
After getting some quotes online, you determine that the monthly premium would be around $25.
You then decide to run these numbers through an online calculator and realize that if you invested those monthly premiums over the course of 30 years with 7% average annual returns, you would end up with $30,677!
Not willing to sacrifice those gains, you decide against renters insurance. Two years later, your house burns down and all of your belongings are destroyed.
Maybe renters insurance would have been a good idea!
In an alternate scenario, you decide that protecting your stuff is of utmost importance and buy the most comprehensive renters insurance available.
30 years go by and you’ve never had an incident. Think about all of those investment gains you missed out on!
The point is, there is no right or wrong answer. You could purchase an expensive renters insurance plan and never need it, or worse, face an expensive incident without coverage.
It’s all based on your risk tolerance and financial stability. Oh, and how much your record collection means to you.
I’m currently renting an apartment in New York City and my 500 vinyl records, along with my three vintage guitars, and rare books are all covered by my renters insurance.
How I Handled My Own Renters Insurance
When I first selected a renters insurance plan in my senior year of college, I had no idea what I was doing. I ended up choosing one of the most expensive options suggested to me by the insurance agent and didn’t really understand my plan until several years later.
At the time, I was paying $41 per month for a highly conservative renters insurance plan that actually included coverage that I didn’t even need. That’s almost $500 per year!
But there’s a new type of renters insurance, where you can pay to cover only the stuff you care about, that wasn’t around when I was in college. This ends up making it much more customizable and affordable.
Companies like Lemonade and Toggle provide a super easy-to-use interface to select your coverage options and customize your plan. If your risk tolerance changes or you want to change your preferences, you can literally log on and do it with a few clicks. It’s literally never been easier.
I hate do this, but let’s see how much I missed out on in investment gains from my $41 per month plan compared to say a $16 per month plan over the course of 10 years assuming a 7% average annual return: $41-$16 = $25
Remember our calculation from earlier? I left close to $31,000 on the table just by failing to optimize my renters insurance. Don’t let the same thing happen to you.
Should You Purchase Renters Insurance?
This is not me telling you whether or not to buy renters insurance. That choice is up to you. I just want you to understand the trade-offs you’re making when you purchase a plan.
Every dollar adds up and you should only pay for the coverage you want and to protect the stuff you care about. It’s worth it to me to know my guitars are all protected.
While they’re irreplaceable to me, it helps me sleep at night knowing I’m covered if something happens.