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Renter’s Insurance

“Rental Insurance” is taken out on property you rent to insure against damage. Rental insurance works like a lighter version of Homeowner’s Insurance.

Why Would I Need Rental Insurance?

burglerAs a renter, this insurance does not do you much good. For example, if there is a fire at your apartment caused by one of your neighbors, your landlord’s insurance would cover the repairs to the building, but not cover any of your stuff that was destroyed. Most renters think their stuff is not worth very much – but when renters are surveyed to actually add up the replacement cost of all their stuff, it usually rises up over $20,000 in total replacement cost. This is where Rental Insurance becomes important.

What does Rental Insurance cover?

Rental insurance kicks in for most events that would cause your stuff to get damaged or stolen. This includes fires, faulty plumbing that causes a leak that damages your things, lightning damage, stuff stolen from a burglar, stuff damaged by vandals or rioters, and stuff broken because of cold/hot weather. It also can protect you from your guests if they were to get injured and want to sue.

There are three main types of protection you get from a basic Rental Insurance policy:

Your Stuff

clutterThis is the most basic, but the most commonly needed type of rental insurance coverage – covering your possessions in case of theft or damage.

As a “best practice”, you should take a video recording of your apartment or rental property at least once a year while walking through and pointing out anything of value. You will not need this video when you open your policy, but if something is stolen or damaged, you will want this video as proof that you owned the thing you need to replace.

This video (or series of photographs) should be stored outside your home (so if there is a fire or water damage, it is not lost). Historically, experts would recommend storing it in a safety deposit box (along with copies of your policy as proof), but it also works to store the video on a cloud storage service like Google Drive or Dropbox, so it can be accessed from anywhere.

Your Shelter

apartmentIf your apartment burns down or gets damaged by a water leak, you probably will not be able to sleep there until the damage is fixed. If you have rental insurance, it will include a clause about “Loss of Use”. This means your insurance company will pay for your hotel expenses while the damage is repaired (up to a limit), so you will always have a roof over your head.

You

Renter’s Insurance also acts as liability insurance for you against your guests. This means if you have a visitor to your home that gets injured and wants to sue you, your rental insurance will cover it (up to a point) including legal fees.

What Rental Insurance Does Not Cover

There are a few cases where your damage will not be covered by a standard rental insurance policy, which is very important to keep in mind if you ever need to make a claim.

Floods

floodMost “Natural” floods (from heavy rain and river overflows) is not covered by standard rental insurance policies. If you are worried about flooding, you can usually purchase an additional “Flood Insurance” policy.

Earthquakes

Just like floods, earthquake damage is not covered by default in most rental insurance policies, but may be purchased as a secondary policy. This can be a big difference depending on where you live.

Hurricanes

While most normal storm damage is covered (like lightning strikes and hail damage), hurricane damage is not. Like Flood and Earthquakes, you can usually add hurricane coverage as a separate policy.

Intentional Damage

Any damage you caused on purpose is not covered. This does not mean stuff that you damaged just for insurance money (which is fraud, and can land you in prison) – it also means if you put your foot through the door in anger, your insurance will not cover the damage.

Getting Reimbursed

If you need to file a claim for your rental insurance, there are two types of reimbursement. The type you have is determined by your policy when you sign it, and the differences are important. Both types are subject to your policy limit – your insurance company will always have a “ceiling” – a maximum amount they will pay before your policy ends.

Replacement Cost

fire damageThis is the more expensive type – “Replacement Cost” covers all of your possessions for however much it will cost to replace them. This means if your apartment burns down, the insurance will cover the full cost of getting you right back to where you were before the disaster (probably a bit better, since your stuff will all be new).

Actual Cash Value

This type is cheaper, and is found in more policies. “Actual Cash Value” means your insurance company will estimate the current value of what your stuff would have been if it was actually being bought or sold when it was destroyed or damaged, and only reimburse you up to that point. This means if you had a 5-year-old computer that cost you $1,000, your insurance company will probably only cover up to $500 or so in damages.

How Much Will Rental Insurance Cost Me?

The good news is that rental insurance is the cheapest type of insurance we cover – a typical policy is only about $180 per year, cheaper for young people with less stuff that needs to be covered.

Depending on where you rent, your landlord might actually require you to get Rental Insurance within a certain period after moving in. The reason for this is simple – if you have rental insurance and a disaster hits, you are more likely to simply file a claim with your own insurance than try to sue your landlord for damages.

Whatever your reason for getting it, Rental Insurance is inexpensive and incredibly useful for every renter.

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