How does renters insurance work?
Most homeowners know that they’ll need to buy homeowner’s insurance to cover their home structure and personal belongings in the event of a break-in, fire, storm, or any other disaster that causes damage. Most renters, on the other hand, never think of getting insurance especially since most of them assume that their property is covered under their landlord’s insurance. For your personal belongings in a rental property to be covered, you will need to buy renters insurance.
What is covered by your landlord’s insurance?
A landlord’s homeowners insurance typically covers
a) The home structure – the policy covers the physical building if it’s damaged by a fire, hailstorm, windstorm, or other natural disasters.
b) Other structures – structures erected on the property such as the fence, detached garage, or a shed may also be covered by the landlord’s policy.
c) Personal property – the landlord’s policy covers their personal possessions at the rental property like the backup generator, tools they keep on-site, and other things.
d) Liability – the landlord’s policy covers injuries that happen in the common areas of their rental property.
Since tenants are always moving in and out, it would be impractical for the landlord’s insurance policy to cover the tenant’s personal property since the landlord has no idea what each tenant owns. The tenant’s personal property belongs to them, not their landlord. Therefore, if the tenant feels the need to protect their personal property, they should take it upon themselves to buy renters insurance.
What does renters insurance cover?
A renters insurance policy is a lot more basic and a lot cheaper than a homeowners policy since the tenant does not own the physical structure. Renters insurance covers the following
a) The tenant’s personal belongings – the policy covers the value of a tenant’s possessions. The higher the value, the more expensive the policy is.
b) Liability – if a person is injured in a renter’s home or the tenant causes damage to a guest’s personal property, the renters' insurance policy will cover the liability of the renter.
c) Alternative accommodation – if you are not able to return to your rented home after a fire or natural disaster, your renter's insurance will cover the cost of alternative accommodation.
How are renters insurance rates determined?
On average, the cost of renters insurance with a $1,000 deductible, $40,000 of personal property, and $100,000 liability coverage is about $17 a month or $197 per year. It can be lower or higher than this amount depending on these factors:
a) Coverage amount – the higher the coverage amount, the higher the premiums.
b) The deductible amount – the deductible is what the renter pays first towards a loss before their renters' insurance policy kicks in. the higher the deductible, the lower the premiums.
c) Type of coverage – there are two kinds of coverage for renters insurance – actual cash value and replacement cost value coverage. The former covers the cost of replacing an item for what it was worth at the time of damage, not what it was worthwhile brand new. Replacement cost value coverage compensates you for the cost of buying a brand new item of comparable quality, value, and function.
Is renters insurance important?
No one will force you to buy renters insurance, but you will be glad you had it in the event that something happens to your personal belongings in a rented home.