If you’ve recently moved into a rental property, now is the time to start thinking about getting renters insurance. You might assume that renters insurance is one of those things that’s nice to have but not an essential. However, renters insurance can come in handy if your personal belongings get damaged or stolen. Without insurance, you’ll have to pay for the full cost of replacing your items out-of-pocket.
There are both pros and cons to having renters insurance, and you should have the full picture before making a decision. In this article, we’ll discuss some of the benefits and drawbacks of renters insurance, how to determine how much coverage you’ll need and what you can expect to spend.
The benefits of renters insurance
Like with any insurance policy, the most obvious benefit to having renters insurance is knowing that you’re covered. But first, you need to ask, “what does renters insurance cover?”
Repairing and replacing your belongings
Renters insurance gives you peace of mind knowing that your personal belongings are covered if they get damaged or stolen. The insurance company will help you pay to repair or replace the items that are lost. Even if you don’t own many things, the cost of replacing essentials, like furniture and clothing, can add up fast.
Additional living expense coverage
Another perk of renters insurance is that most policies cover more than your personal possessions. Renters insurance usually includes additional living expenses coverage, which would pay for your hotel or another apartment if you were displaced from your home and had to go elsewhere.
Medical expense coverage
If you frequently have guests over at your apartment, you might have an occasion to be grateful for renters insurance. Your renters insurance policy will cover someone’s medical bills if they were to get injured in your apartment. Some renters insurance even provides coverage if your dog bites someone at your home or even off your property. You can also expect your renters policy to provide liability insurance if you accidentally damage someone else’s property.
The low cost of renters insurance
Lastly, renters insurance is inexpensive. In some ways, purchasing coverage is a no-brainer. According to the Insurance Information Institute (III), the average cost of renters insurance in the United States was just $180, as of 2017. For about $15 per month, you can have coverage for the majority of your personal belongings.
The drawbacks of renters insurance
It’s not free
But like all things, there are a few drawbacks to renters insurance. Most notably, renters insurance costs money. Although it’s a small cost compared to many other types of insurance, it’s still an expense that can be hard to justify if you’re trying to save money. If you never use the insurance policy, the cost of your renters insurance is money you could have put toward something else.
Insurance deductibles
Deductibles are another downside of renters insurance. Your deductible is the amount of money you are responsible for paying before the insurance company will take over. If your personal belongings aren’t worth much, you can probably afford to replace them out-of-pocket, which makes the insurance coverage worthless.If you choose to lower your deductible, you will pay a higher annual premium to compensate.
You may need additional coverage
Depending on what type of belongings you have, your items won’t all be covered under a basic renters insurance policy. On top of that, most renters insurance policies are capped at a relatively low amount. If you have valuable items like fine jewelry or art, you’ll probably need to purchase additional coverage for those things.
Determining how much renters insurance you need
Take an inventory
To determine how much renters insurance you’ll need, start by creating an inventory of all the things you own. Write down every item, take photos, write a description that details the condition of the item and note the price you paid for it. Having an original receipt is even better. For larger items, like appliances, note the serial number in your inventory. After you estimate the total value of your items, you can determine how much coverage you’ll need to purchase.
Estimate how much you’re willing to pay out-of-pocket
As you’re deciding your coverage amount, consider how much money you could afford to put toward replacing your items if you needed to. If you can comfortably put $1,000 towards replacing your items out-of-pocket, you can probably opt for a higher deductible, which will lower your premium. If you’re strapped for cash and need the insurance company to pay for as much as possible,choose a lower deductible.
Another option: Keeping an emergency fund
Whether you have insurance or not, no one ever anticipates their personal belongings getting damaged or stolen. If you’re not sold on the idea of purchasing renters insurance, another option is to create an emergency fund. This can be a separate savings account that you put one lump sum into or deposit money into overtime. By having money already set aside, you’ll be prepared should you need to replace some of your belongings unexpectedly.
If you choose this route, reserve that money for emergency purposes only. Don’t get tempted to dip into your account so you can have a few extra dollars to spend on something you don’t need. The point of an emergency fund is to have a backup in case you need money in a pinch. If you end up draining the account and you don’t have renters insurance, you could put yourself in debt.
The bottom line
For most people, having renters insurance is a good idea. It offers protection from unforeseen circumstances, and it can save you a lot of money in the long run. However, renters insurance is beneficial for certain people, and less of a need for others. If you think it’s the right option for you, ask an agent about how to get renters insurance from your current insurance company if you want to bundle policies, and always remember to compare quotes from other companies.
Whatever you decide, have some form of coverage for your personal belongings, whether that’s in the form of an insurance policy or an emergency fund that you manage yourself.
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