As a finance writer, I am surrounded by people who know a lot about managing money. But even those with the most money know-how can still miss financial must-haves.
For instance, in a recent conversation, a few of my coworkers stated they didnât have renters insurance. This puts them among the 59% of renters who donât have renters insurance, according to a poll from the Insurance Information Institute. On the other hand, 95% of homeowners carry homeowners insurance.
Granted, renting comes with fewer property responsibilities than owning. But donât assume you can skip insurance for your home simply because youâre leasing it. Go without it and youâll expose yourself to some major risks.
See why opting for a policy is protection you canât live without, and learn how renters insurance can help smooth over the following five major renting crises.
1. Damaged Belongings
If youâre asking yourself whether you need insurance as a renter, a better question might be, Can you afford not to have it?
If the relatively small cost of a renters insurance premiumâtypically between $15 and $25 per monthâseems too expensive, consider the alternative, suggests John Espenschied, agency principal of Insurance Brokers Group.
âImagine replacing all your clothes, furniture, electronics, food, personal items, and priceless personal memorabilia,â he says. With renters insurance, the insurer will cover most or part of the value of damaged items. Without this coverage, youâre completely on the hook for all those costs.
Espenschied tells a story of one of his clients, a young woman to whom he recommended rental insurance multiple times. She declined the coverage.
Months later, there was an electrical surge in the building. âIt took out everything she owned that was plugged in, including the TV, computer, and several other items,â Espenschied explains. These items were permanently damaged and unusable.
Had she opted for renters insurance, Espenschied could have helped her submit a claim and get the money to replace those belongings. Unfortunately, without the policy there was nothing he could do.
Donât put yourself in the same positionâget a renters insurance policy. On top of that, take steps to document all belongings and valuables so you can prove ownership in a renters insurance claim.
2. The Temporary Loss of a Habitable Home
Some disastersâsuch as fires, flooding, and electrical issuesâcan require extensive repairs and render your rental uninhabitable. Your landlord will usually handle these repairs, but if you lose the use of your home, your landlord might only be required to refund a prorated rent for the days you canât live in your rental.
But if youâre out of a place to live, your daily rent rate might not cover any decent hotels or other temporary housing options.
But thereâs good news: âMost renters insurance policies can help you in the event something happens to your apartment or house and you have to live elsewhere while itâs repaired,â says Jennifer Fitzgerald, CEO and cofounder of insurance comparison site PolicyGenius.
Typically, you can find a hotel nearby and your renters insurance will cover the costs of your stay until you can resume habitation of your home.
3. Stolen Belongings
Renters insurance typically includes coverage for theft and burglary too. If your home is broken into or burglarized, you can file a claim with your renters insurance provider to replace any stolen or damaged items.
âIt even covers your belongings when theyâre not physically in your home,â Fitzgerald says. âSo if you take your laptop with you to the local coffee shop or on vacation and itâs stolen, your policy could help cover the costs of getting it repaired or replaced.â Renters insurance will usually be the policy that covers theft of personal items from your car too.
If your home is broken into or your purse is stolen from your car, promptly notifying authorities is an important stepâfiling a renters insurance loss claim will usually require a police report of the theft.
4. Personal Liability for Legal Damages
The most important protection your renters insurance provides, however, might be personal liability protection.
âIf your dog bites someone or a food delivery person slips and falls, you’re covered,â says Stacey A. Giulianti, chief legal officer for Florida Peninsula Insurance. Instead of being held personally responsible for those damages, your insurer will step in and help. âThe carrier will even hire and pay for an attorney to defend any resulting lawsuit.â
This can be especially important if you are found responsible for damage to adjacent properties as well, Espenschied says. For example, renters insurance will cover you if your toilet or tub âoverflows and leaks into the neighborâs unit below, causing damage to their personal property and cost to repair the building.â You may also be covered if a kitchen fire in your apartment causes damage to the unit above you.
The damage and loss can easily add up to tens of thousands of dollars. In cases like these, renters insurance can be the difference between smooth recovery and huge financial loss or even bankruptcy.
Make sure you understand your coverage. âEvery policy is different, so talk to an agent and read your policy terms,â Giulianti warns.
5. An Eviction for Violating Your Lease Agreement
Many lease agreements include a clause in which the tenant agrees to purchase a renters insurance policy. These common clauses usually clarify that the landlordâs property insurance coverage does not extend to your personal belongings.
If you sign a lease with such a clause, you are agreeing to maintain this insurance coverage throughout your residency there. If you fail to get a policy or allow it to lapse, your landlord is within their rights to serve you with a âcomply or quitâ notice and possibly begin eviction proceedings.
If you donât currently have a policy, reconsider getting renters insurance. Alongside a healthy emergency fund, having the right insurance can bring vital financial security to your life. For the cost, renters insurance provides protection and peace of mind.
âMost renters can get a policy for around $20 per month,â Fitzgerald says. âThatâs a small price to pay when you think about the fact that if you donât have renters insurance, youâll be forced to cover the cost of replacing any and all items damaged.â
Procuring a renters insurance policy is a smart step toward financial security. With the right policy, you can avoid debt in an emergency and protect your possessions and your home. If youâre ready to buy a home, learn more about the ins and outs of home mortgages in Credit.comâs Mortgage Loan Learning Center. And to be financially prepared for anything, itâs also a good idea to build your credit score so you can qualify for loans and other credit when necessary. See where you stand with a free credit score from Credit.com.
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