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How Much Renters Insurance Do I Need? –Forbes Advisor

How Much Renters Insurance Do I Need?
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Editorial Note: We earn a commission from partner links on Forbes Advisor. Commissions do not affect our editors’ opinions or evaluations.

Renters insurance can offer a financial safety net. For a little more than $10 a month, a renters insurance policy can protect you financially if your personal property is damaged or stolen. It also can pay for legal help if someone sues you over an accident you are responsible for.

Some landlords may require you to buy renters insurance. Even if you’re not required to carry renters insurance, it still can be a worthwhile investment. How much renters insurance you need depends on the value of your personal belongings. The more valuable your belongings are, the more coverage you might want to purchase.

What Renters Insurance Covers: Understand What You’re Buying

Standard A renters insurance policy typically includes coverage for personal property, liability, additional living expenses and medical payments to others. Here’s a breakdown of each coverage type.

Personal property coverage

A landlord’s insurance covers structural damage to the building where you rent. But it doesn’t cover damage or theft of your personal belongings. That’s where renters insurance comes in.

The personal property section of a renters insurance policy covers belongings that are damaged or destroyed by a problem covered by your policy. Some of the problems covered by renters insurance include:

  • Fire
  • lightning strikes
  • Windstorms
  • Hailstorms
  • Vandalism
  • Theft
  • Accidental water backups
  • Weight of ice, snow or sleet
  • frozen pipes

Floods and earthquakes are generally excluded from coverage. Look into earthquake insurance and flood insurance for renters if you’re interested in coverage for those natural disasters.

A renters insurance policy also covers belongings that are stolen. This includes belongings inside your residence, such as computers, clothes and furniture. It might also cover personal property that’s swiped when you’re away from home, such as belongings taken from your car or a hotel room.

Personal property coverage typically includes an insurance deductible, such as $500. The amount of your deductible will be subtracted from any claim payout you receive for the repair or replacement of your personal property.

For example, if you have a $500 deductible and your $2,000 leather sofa is destroyed by a fire, you’ll receive an insurance check for $1,500 ($2,000 – $500 = $1,500).

liability insurance

Liability insurance pays for injuries and property damage accidentally caused to others. For instance, if your dog bites a neighbor down the street, liability insurance can pay for their medical bills. Or if your child throws a baseball through a neighbor’s window, liability insurance can cover the cost of the damage.

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Liability insurance also pays for your legal costs, including judgments and settlements, if you are sued because of an accident.

Additional living expenses

Another component of a renters insurance policy pays for what are known as additional living expenses. This portion of a policy covers expenses you rack up when a problem covered by your policy (like a fire) makes your home temporarily unlivable. This can include such expenses as hotel stays and restaurant meals.

Medical payment coverage

Your renters insurance also includes medical payments coverage, which helps cover smaller medical bills for guests who are injured while visiting you no matter who is at fault for the accident. The policy limits are usually between $1,000 to $5,000.

For example, if a guest slips and sprains their wrist in your apartment, medical payments coverage can pay for a trip to urgent care.

Related: What does renters insurance cover?

Calculating How Much Renters Insurance You Need

To help calculate how much renters insurance you need, you’ll want to add up how much your belongings are worth. You can do this by taking an inventory of your personal property and assigning a value to your belongings. You’ll also want to figure out how much coverage you want for liability and additional living expenses.

How much personal property renters insurance do I need?

A key step in figuring out how much renters insurance you need is to put together a home inventory that lists your belongings. An ideal home inventory will include:

  • Description of each individual piece of personal property (such as your laptop) or each group of belongings (such as your wardrobe)
  • Estimated value of each item or group of items
  • Date you bought an item or group of items
  • Receipts
  • Make, model and serial number for electronics and similar items
  • Photos or videos of your belongings

Several apps are available to make it easier to put together a home inventory. For instance, the home inventory app offered by the National Association of Insurance Commissioners can be downloaded for free from the App Store or Google Play.

Once you’ve got all of your belongings cataloged in your home inventory, it’s time to add up how much all of your belongings are worth. This will give you a rough idea of ​​how much personal property coverage you’ll want to buy.

Renters insurance personal property coverage is often sold in amounts between $15,000 to $50,000, but you may be able to find a policy with more or less coverage.

How much renters liability insurance do I need?

The liability portion of a renters insurance policy might default to a standard amount such as $100,000. But you can certainly bump up that amount. In fact, you may want to add more liability protection to make up for what could be taken from you in a lawsuit.

You might also want to consider adding umbrella insurance. This coverage gives you extra liability coverage that can pay your legal fees, settlement costs and even medical payments in a lawsuit stemming from an accident such as someone slipping and falling on a rug in your apartment.

How much coverage do I need for additional living expenses?

Coverage for additional living expenses (ALE) may either be a flat amount, such as $5,000, or a percentage of your personal property limit. For example, if your policy provides $30,000 in coverage for personal property and the ALE figure is 40%, you’d be covered for up to $12,000 of what’s known as “loss of use” expenses.

If you need more ALE than your policy’s default, you can typically buy more.

Figure out your deductible

When you file a claim under your renters insurance policy, your insurance deductible is the amount that will be subtracted from your claim check from the insurance company.

Let’s say a grease fire in your kitchen causes $3,000 in damage to furniture and cooking equipment that you own. If your deductible in this scenario is $500, then your insurer would write you a claims check for $2,500 to cover the damage.

Personal property coverage generally comes with a deductible. It’s worth noting that liability and ALE coverage don’t have deductibles.

Renters insurance deductibles usually are anywhere from $250 to $2,000. The higher your deductible is, the lower your insurance premium will be.

To choose your deductible amount, consider how much money you’d need to come up with to cover damaged, destroyed or stolen belongings. For instance, if your deductible is $2,000 and your $1,500 laptop computer is stolen, then your policy would provide no coverage. You’d be responsible for the full cost of replacing the computer.

Bottom line: Weigh the benefits of a higher deductible and lower premiums against the out-of-pocket costs you might be stuck with if your deductible is too high.

Additional Renters Insurance Coverage to Consider

Replacement cost vs. actual cash value

When you buy a renters insurance policy, you’ll typically have the option to choose between replacement cost or actual cash value (ACV). Here’s the difference between the two:

  • Replacement cost coverage country to replace your damaged items with new, similar items.
  • Actual cash value coverage takes depreciation into account and will only pay the current value of your item.

For example, let’s say your $1,000 bicycle was stolen. Replacement cost will pay for a new bike. ACV will only pay for the depreciated value of your bike. Replacement cost coverage is more expensive but it’s generally the better coverage.

Schedule high-value items

If you have expensive belongings that you could not afford to replace if they were stolen, you should consider buying extra coverage.

Some renters insurance policies include what are called “special limits” for the theft of certain types of valuables. For example:

  • $1,500 for loss by theft of jewelry, watches and furs
  • $2,500 for loss by theft of firearms
  • $2,500 for loss by theft of silverware

You typically can increase the coverage limits for high-value items by “scheduling” personal property.

earthquake insurance

A typical renters insurance policy excludes coverage for damage caused by earthquakes. So, if you live in an earthquake zone, you might look into buying earthquake insurance. For those living in quake-plagued California, for instance, earthquake insurance for renters purchased through the CAlifornia Earthquake Authority might cost as little as $35 a year.

flood insurance

Standard renters insurance does not cover damage caused by floods. If you live in a flood-prone area, you might want to purchase renters flood insurance to fill that void. Tea National Flood Insurance Program says flood insurance for renters starts at $100 a year.

How Much Is Renters Insurance?

Among the renters insurance companies Forbes Advisor analyzed, the average cost of renters insurance was only $125 a year for $15,000 in coverage for belongings.

The cost of renters insurance depends on factors such as:

  • The amount and type of coverage you select
  • The deductible you pick
  • Your location
  • Your claim history
  • Your credit history

Tips for Buying Renters Insurance

  1. Shop around. Get renters insurance quotes from multiple companies. You can typically get free quotes online or by contacting an independent insurance agent.
  2. Ask about discounts. Insurers offer an array of discounts that can help bring down your renter insurance premiums. For example, you might qualify for a discount if you insure your car and your rented apartment or home with the same company.
  3. Think over the deductible. Determine whether you’re more interested in saving money up front with a higher deductible or choosing a lower deductible to make sure your personal belongings are adequately covered if you need to file a claim.
  4. Decide on the coverage limits. Make sure you’ve got enough coverage so you can repair or replace items lost in an incident covered by your policy without suffering a financial setback.

Related: How to find cheap renters insurance

Find the Best Renters Insurance Of 2022

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