Renter Insurance Cost Guide
Imagine your apartment burns down, and you lose everything. How much money would it take to replace all your possessions? That includes your furniture, electronics, clothing, kitchen supplies, and jewelry. Most people would need somewhere between $10,000 and $20,000 to get back on their feet, but how many people have that kind of money sitting around? In fact, a recent study from the Federal Reserve found that 4 in 10 Americans couldn’t afford an unexpected $400 expense, let alone a $10,000 disaster. That’s where renters insurance comes in.
What is Renters Insurance?
Renters insurance provides for the replacement cost of your stuff in case of damage due to natural disasters and theft. It is a relatively inexpensive type of property insurance with a few components.
Renters insurance provides coverage in three specific ways:
- Personal possessions: if your apartment gets damaged or destroyed, renters insurance will pay for the replacement costs of all your belongings, like furniture, clothing, dishes, electronics and even jewelry. It also covers you if you get robbed, including if your stuff is not physically in your apartment. For example, if your phone gets stolen, you’re covered.
- Liability: policies also protect you against any personal liability in case someone gets injured inside your apartment. For example, if a visitor trips over your coffee table and decides to file a lawsuit, renters insurance has you covered.
- Additional living expenses: imagine your apartment burns down and you have to get temporary shelter elsewhere. Renters insurance can pay for the additional expenses associated with living out of a hotel room while you get your life back together.
What Kinds of Renters Insurance are There?
There are two types of renters insurance policies:
- Actual cash value policies are the cheapest option because they pay out the real value of your lost or stolen possessions less however much they’ve depreciated. For example, if you bought a new computer for $1,000 last year, that same computer may only be worth $750 today. An actual cash value policy would pay out $750.
- Replacement cost policies are a bit more expensive because they pay the actual cost of replacing your belongings. They don’t subtract anything for depreciation. In the above example, a replacement cost policy would pay the full $1,000 to buy a new computer. Replacement cost policies make sense for most people because there’s usually only a small difference in price between the two. An actual cost value policy would only make sense if you are on an incredibly strict budget with no room for a few extra dollars.
How Much does Renters Insurance Cost?
Renters insurance is one of the cheapest forms of financial protection on the market today. According to the Insurance Information Institute, it costs less than $200 a year to maintain coverage, or about $16 a month. To keep that in perspective, as of this writing, a Premium Plan for Netflix costs $13.99/month.
Insurance companies will determine your exact price based on where you live and the value of your possessions. If you have lots of expensive jewels and artwork, and/or if you live in a high-crime or otherwise risky neighborhood, expect to pay more for coverage.
Something to keep in mind is that auto insurance companies usually offer renters insurance, too. Bundling your policies together can make it simple to make a single payment each month for all your insurance, and many carriers offer discounts for buying multiple products.
The bottom line is that renters insurance is a must-have financial product. The premiums are so small compared to the amount of protection offered that it’s really a no-brainer..
How to get Renters Insurance
First, figure out how much your stuff is worth. If you’re like most people, $20,000 should be enough to replace all the belongings in a typical 1-bedroom apartment.
Then, pick your insurance carrier. Start with your auto insurance provider, if you have one, because there may be discounts available for bundling multiple policies together. The three largest companies based on market share, according to the National Association of Insurance Commissioners, are State Farm, AllState,and Liberty Mutual.
Frequently Asked Questions
- Should I buy renters insurance?
Yes, we think renters insurance is a must-have form of financial protection. The Insurance Information Institute found that nearly 6 out of 10 renters do not have renters insurance. That’s too bad, because it’s one of the cheapest forms of insurance. Natural disasters and accidents can happen to anyone, and renters insurance provides an essential level of basic security.
- Can landlords require renters insurance?
Landlord-tenant laws vary depending on the city and state where you live, but it’s common for landlords to require their tenants to maintain renters insurance. For instance, lease agreements might stipulate that renters obtain insurance as a condition for living in the apartment. Renters insurance provides liability protection for tenants in case visitors get injured while in the apartment. This includes the landlord and anyone working on the apartment, like repairmen. Getting coverage makes sense for everyone involved.
- Does my landlord’s insurance policy cover my property?
No. This is a common myth that prevents lots of renters from buying insurance. Most landlords only insure their buildings, not your personal property.
- Can I share renters insurance with my roommate?
No. Renters insurance only protects the possessions of the policy owner. Roommates and significant others simply aren’t protected and will need their own separate policies. One important caveat to keep in mind is that spouses share property in common, meaning they only need one policy for full protection.
- Will renters insurance cover things like my phone or computer?
Yes, if they are damaged or destroyed by a covered risk, like a fire or burglary. Check your policy for specific information on what’s covered.
Based on a$20,000 in personal property with $100,000 in liability protection