In the U.S., the national rent average rose 3.3% over a year ago rents — although some cities saw even greater annual increases. Since last year, renters saw their median rent climb 5% in Detroit, 8.5% in Kansas City, and a whopping 14.9% in San Francisco.
Faced with ever-increasing rents, many Americans may opt to skip renters’ insurance. But while there are many kinds of insurance that aren’t worth it, renters’ insurance simply isn’t one of them. Here are five good reasons why you totally need renters’ insurance.
1. Protection for Your Personal Property
A very common renters’ misconception is the belief that their landlord’s property insurance will cover damage or loss in case of fire or a break-in. But a survey from insurance company Nationwide revealed that 68% of renters ages 23 to 35 would spend an estimated $5,000 to replace their belongings if an unfortunate event did occur. Despite the potential big loss, a stunning 56% of the surveyed renters didn’t have renters’ insurance.
A standard HO-4 insurance contract, commonly referred to as renters’ insurance, provides the necessary protection for your personal property against covered perils, including fire, theft, vandalism, and even volcanic eruption. A best practice is to look for a policy that provides 100% replacement cost protection, which may be a bit more expensive — but ultimately worth every penny. After all, you want to replace your loss with the latest TV model, not one from two years ago.
Another best practice: If you’re an avid comic book collector, have a taste for expensive imported furniture, or are an early adopter of all things high-tech, look into floater insurance to get the necessary higher-limit coverage that you need for any specialty belongings.
2. Additional Coverage Away From Home
Most policies provide protection for your personal property up to 100 feet from your home, so your stuff is covered when moving or using your building or community’s facilities, such as a shared pool or clubhouse.
However, there are additional benefits for owning renters’ insurance. Depending on your policy, your personal property may also be covered in case of theft outside the premises of your home. Let’s imagine that you’re using your laptop and expensive high-definition earphones at a coffee shop. You walk away to get a refill and somebody makes a run with your items. The “off premise theft” clause of your renters’ insurance may enable you to make a claim for the stolen items.
Consult your insurance agent and read the fine print of your policy to learn more about applicable coverages and limitations. For example, if you store many items in a trailer or storage facility for part of the year, you should ask about extended theft coverage.
3. Liability Protection
Life happens. Say one night one of your friends slips and falls down the stairs at your apartment, severely hurting her back. Or your dog bites your neighbor’s son, requiring your neighbor to spend several hundred dollars in medical expenses. While you can’t prevent every single event, you can buy coverage against potential lawsuits.
If you are held legally liable by a court, then the liability portion of your renters’ insurance would cover payouts for medical bills related to the accident, or replacement costs for the other party’s property damaged at your home.
Keep in mind that your dog’s breed may affect your monthly premium or even your eligibility for coverage. Many insurance companies will deny coverage for pit bulls, Staffordshire terriers, doberman pinschers, rottweilers, and German shepherds. When shopping for renters’ insurance, provide full disclosure of your dog’s breed and history of biting or abuse (in the case of rescue dogs).
4. Affordable Price for Loss and Liability Protection
In the survey from Nationwide, three out of four of those without renters’ insurance don’t realize they can get monthly coverage for as little as the cost of a pair of movie tickets.
According to the National Association of Insurance Commissioners, the average renters’ insurance policy costs between $15 and $30 month for $30,000 to $50,000 of property coverage, with a deductible ranging from $500 to $1,000.
However, lower prices are possible. In 2014, a writer for Forbes magazine was able to find a renters’ insurance policy to cover $25,000 of his personal property for an annual lump sum payment of $150 ($12.50 per month). Paying 0.60% to fully protect all of your stuff is as affordable as it gets.
Check for additional potential savings for:
- Having certain security or fire-prevention systems;
- Being a non-smoker;
- Being part of a special interest groups (e.g. labor union, alumni association);
- Bundling with existing car insurance policy;
- Staying claim-free for a specific period of time; or
- Having special status (e.g. senior citizen, college student, or military).
5. Greater Choice of Rental Opportunities
Last but not least, making the investment in renters’ insurance may expand your options when looking for apartments. More and more landlords are requiring renters’ insurance from their tenants.
The cost of homeowners’ insurance is rising faster than that of renters’ insurance. For example, in 2012, the average premiums for homeowners’ insurance and renters’ insurance increased by 5.6% and 0%, respectively, from the previous year.
A landlord can only legally require tenants to carry renters’ insurance when signing a new contract or renewing an existing lease. By shopping in advance for an adequate policy, you can have ammunition to prevent a rent increase — or be ready to find a new and better place!