Millions of Americans live in rented homes for a variety of reasons. For some, their life is too unpredictable to commit to homeownership in a particular area. For others, their only option is renting due to an expensive housing market.
Personally, I rent my home because of the flexibility that comes with signing a lease instead of committing to a mortgage payment that could span 30 years. Plus, it is possible to find an affordable apartment that could help you save more money towards your long term financial goals such as retirement.
However, renting a home comes with a unique set of challenges. Renters insurance can protect you against the worst-case scenarios that could leave you in a bad financial spot.
Let’s take a closer look at what renters insurance covers and whether or not renters insurance is worth it.
The importance of renters insurance
Renters insurance allows you to protect your belongings in the event they are destroyed while you are living in a rented home. Although it does not insure the physical space against damages, it can help you to replace your things.
Of course, we all hope that nothing damaging ever happens at our apartment. However, it is not impossible for a break-in or other unforeseen emergency to destroy your things. These kinds of events always seem to happen at the worst possible time.
Without renters insurance, you would be on the hook to replace all of your belongings. With renters insurance however, you would be able to replace your damaged items without worrying about the strain it would place on your budget.
What does renters insurance cover?
Although individual renters insurance policies vary, let's go over some of the most common events covered. As you shop for your own renters insurance policy, you should consider your unique situation.
1. The theft of your belongings
Unfortunately, theft from break-ins can be a problem even in the safest neighborhoods. With some policies, you’ll be able to recover the cost to replace your stolen items.
2. Fire and smoke damage
No one expects a fire to happen in their home. However, thousands of home fires happen every single year. In fact, 354,400 home structure fires occurred between 2013 and 2017 in the US. In many cases, a fire will destroy most of the items in a home. Without renters insurance, it could be financially difficult to replace these items at one time.
3. Falling objects and glass damage
A storm can knock falling objects directly into your home, leaving a trail of damage behind. You could be responsible for replacing your damaged items without renters insurance.
4. Automobiles or aircraft that crash into your apartment
Unfortunately, cars have been known to crash into homes and cause significant damage. Although plane crashes are less common, some renters insurance policies cover that type of damage as well.
5. Water damage
A burst pipe can lead to a flood of damage. With potentially several inches of water in your home, you can expect to replace thousands of dollars worth of belongings. Even a solid emergency fund could be stretched thin without the help of renters insurance.
6. Electrical surge damage
Although it is good practice to hook up your electronics to a surge protector, many renters insurance policies will help you replace any damaged electronics due to a surge.
7. Extreme events
Volcanos, riots, vandalism, and explosions may seem like something out of a movie, but you never know what the future may hold. Most renters insurance policies cover a wide variety of other scenarios that you may not have thought of. As you think about your current apartment, consider what events might cause damage in your area. Look for that coverage as you shop for policy options.
Common questions about renters insurance
As with most insurance policies, it is a great idea to ask questions before you choose to plan. With that, let’s tackle the most common questions about renters insurance.
Does my landlord's insurance policy cover me?
Although your landlord’s policy will likely cover the cost of repairs to your apartment, it will not cover your personal items. A landlord is interested in protecting their property against damages. But their policy will not cover the items that you have in that property.
For example, let’s say a pipe burst in your apartment and flooded everything. Your landlord’s policy would help them cover the cost of repairs to the actual property. However, it would not help you cover the cost of replacing your belongings.
With that, it is up to you to find a policy that covers the replacement of your belongings.
Does my roommate’s policy cover me?
In most cases, your roommate’s policy doesn’t cover you. Unless you are specifically covered by the policy, then you should consider purchasing your own coverage.
Does renters insurance cover high-value items?
There is a wide range of policy options for renters insurance. With that, some policies do cover high-value items but other policies do not.
If you are looking to cover a specific item such as heirloom jewelry or your high-end laptop, then read the fine print of your policy to find out if it covers those items. If not, you can consider supplemental insurance for those particularly high-value items.
Is renters insurance worth it?
So, the question everyone asks themselves is if renters insurance is worth it or not. Here’s how to decide for yourself.
Take an assessment of your belongings
The first thing to do is to determine the value of the items in your apartment. I recommend taking a notepad through each room in your home and writing down an approximate value of the items you see.
Nothing is too large or small to include. You may want to round your numbers for certain rooms. For example, instead of accounting for every dress and pair of shoes in your closet, come up with a reasonable number that you would need to replace all of those clothes.
Don’t forget big-ticket items such as your furniture, TV, and computer. You might be surprised to find out how valuable your items are when you add the numbers together. It is not unreasonable to assume that you have several thousand dollars worth of items in your apartment.
Compare renters insurance policy quotes
Once you have a better idea of what it would cost to replace your things if something were to happen, it is time to shop around for renters insurance policies. You can find policies that range from $5 to $30 per month.
Depending on the value of your items, a few dollars a month could be a no brainer to protect your things. After all, thousands of dollars in items would be difficult for most of us to replace in an emergency.
In most cases, renters insurance is worth it. But it is a personal decision based on your risk tolerance. If you would be content to replace the items on your own tab or simply live without, then you might be able to skip renters insurance. Otherwise, you might feel better knowing that your items are protected no matter what life throws your way.
Personally, my husband and I pay for renters insurance for our small apartment. Although none of our household items are particularly valuable, it would definitely be a financial burden to replace everything all at one time. Since we have other plans for our savings, such as building a down payment for a home and growing our retirement savings, we’ve decided to pay for renters insurance. The $12 we pay each month is completely worth the peace of mind that comes with it.
Consider your personal situation before making a decision about renters insurance.
The bottom line
Renting an apartment to call home can be a fun adventure. However, life has the habit of throwing unexpected curveballs our way. Renters insurance can help you handle the ups and downs in stride.
Renters insurance is one of several insurance policies that you may have not realized you needed in the past. Take a few minutes to find a policy that works for you today!