Renter’s insurance is one the best examples of adults not remembering the lessons of their childhood, and continuing to learn new lessons the hard way. There are innumerable stories of people passing on renter’s insurance, then being forced to watch in horror as their livelihood burned away in an impromptu fire. Yes, it can be difficult to wrap your mind around spending yet more money on a new living situation, when you are not explicitly required to. In short, the consequences of not having rental insurance can be so drastic, and the cost of obtaining renter’s insurance is so low, that there really is no excuse not to have a renter’s insurance policy. Here are the three things to consider when shopping for renter’s insurance.
Landlord’s Insurance Policy
One of the most common misconceptions surrounding rental insurance is the assumption that if your landlord purchased insurance for your building, that your unit is covered by that policy. In fact, the reality is very nearly the opposite—if your apartment floods, or catches on fire, and that then damages the structure of the building, you will be liable for the damages. A landlord’s insurance policy covers the actual structure of the building, individual residents are responsible for their own units. This caveat can put an incredible financial burden on you if your building becomes damaged as a result of your unit; renter’s insurance can protect you from that.
Replacement Cost Value vs. Actual Cash Value
If you read nothing else before purchasing a renter’s insurance policy, read this paragraph. Renter’s insurance policies offer two replacement options: replacement cost value or actual cash value. When you first purchase your policy, you have to decide which kind of repayment method you prefer.
Replacement cost value means that if your laptop is ruined in a fire, your insurance policy will give you the same new laptop. If you chose actual cash value, then when that same laptop gets ruined in a fire, your insurance policy will give you the cash value of your laptop when it was damaged. That does not mean you will get cash for the full amount you paid for your laptop, unless it was damaged the same day you bought it. Your insurer will determine what the value of the laptop was on the day it was damaged, then pay you that amount. Consider these two options carefully before making your choice on your renter’s insurance policy.
Renter’s insurance works like any other kind of insurance, in that there is a deductible and a maximum amount of coverage promised. Always consider these two things before purchasing a new insurance policy. How much are your belongings worth? A person fresh out of college might only have $10,000 worth of belongings, while someone in their early thirties may have belongings totalling $100,000 or more in value. In that case, the person out of college might choose a plan with a low deductible and lower total coverage. However, a person with more valuable belongings might need a plan that covers more and, as a result, will have a slightly higher deductible and a much higher maximum. Remember, that these numbers directly affect your monthly cost for your policy. A smaller deductible generally has a higher monthly rate, while a higher deductible costs less month-over-month.
In short, unless you are living in temporary housing, yes, you do need renter’s insurance. As people continue to own increasingly value objects, the need for insurance continues to grow. For less than the cost of a pizza a month, you can protect everything you own. While some landlords will require renter’s insurance, everyone should have it. It’s a small price to pay for protecting what you own, and having peace of mind.
To learn more, contact an insurance professional at TGSInsurance.com.