Renters insurance is an insurance policy designed to protect you and your belongings, but is it really necessary?
Every tenant should have renters insurance, also known as an HO-4 policy. It is not required by law, but a standard policy provides peace of mind. Let’s take a look at five reasons why you need renters insurance.
5 Benefits of Renters Insurance
1. Protects your personal property
Some tenants believe their landlord’s insurance will cover their personal possessions. In fact, landlord insurance protects the landlord from financial losses through property and liability coverage. In order to protect your personal property, you need renters insurance. For travelers, renters insurance can be a lifesaver. Certain policies extend protection while you’re on vacation!
Renters insurance will reimburse you if a named peril—an unexpected and accidental event covered in the policy—causes any loss or damage to your property (including food). Check out this list of a few named perils covered by renters insurance:
- Falling objects
- Overflow of water from plumbing
2. Provides liability protection
The liability portion of a renters insurance policy will protect tenants against lawsuits for bodily injury or damage that happened on or off the property. For example, your guest can file a claim if they slipped and fell inside your home or if they were bitten by your pet. Your policy would pay for the medical bills or your legal expenses in the event the person sues.
Keep in mind that renters insurance will not cover a pet that is considered a “dangerous breed.” To be certain a policy covers pet-related injuries, ask an agent about their breed restrictions, such as Pit Bulls, Rottweilers, Chows, Presa Canarios, and Akitas.
3. Covers loss of use
If your home becomes uninhabitable as the result of a covered peril, some renters insurance policies will reimburse you for additional living expenses under a loss of use provision. Expenses include hotel bills, restaurant meals, and other costs incurred by your forced relocation.
4. Your landlord requires it
Unless you live in Oklahoma, your landlord can require you to purchase renters insurance and make it a condition for lease renewal. Renters insurance provides another layer of protection for landlords by limiting their liability and making you, the tenant, responsible for your own losses.
Renters Insurance Requirements in Other States
Some states put a dollar limit on renters insurance policies; one bans it entirely. Here are some interesting facts:
- Oklahoma courts ruled that because tenants’ rent payments help pay for landlord insurance premiums, renters insurance is double coverage and therefore unnecessary.
- Virginia law states the annual cost of renters insurance plus the security deposit cannot exceed two months' rent.
- Landlords in Oregon can require tenants to buy a $100,000 policy, but they must carry a comparable policy and provide proof to tenants upon request. Tenants that earn 50 percent or less of the median area income or live in subsidized housing are exempt from the requirement.
5. It’s affordable
Renters insurance is generally low-cost, but rates do vary based on location, coverage amount, and credit.
How much is renters insurance?
According to Insurance.com rate analysis, renters insurance costs $17 a month or $204 a year; it is the national average for a recommended coverage level of $40,000 for personal property, $100,000 of liability protection, and $1000 deductible.
What renters insurance doesn’t cover
Renters insurance covers a number of perils, but it excludes earthquakes and floods. You should purchase separate policies or purchase a rider, also known as an endorsement, to get coverage for these two types of disasters.
An insurance rider (endorsement) is an amendment or an addition to a basic insurance policy. Riders can be expensive in areas prone to a specific type of peril, like floods.
While you shop for renters insurance, speak with an agent or obtain a sample policy to understand what is covered. Sure, renters insurance is another expense; however, for a few dollars a month, it safeguards your financial future, your valuables, and it can make you a better qualified tenant in a competitive rental market.