How much renters insurance do I need?
Many landlords require their tenants to have a renters insurance policy, but some don’t. Even if your lease doesn’t mandate this type of insurance, it may still be a good idea. Renters insurance provides financial protection if your belongings are damaged or destroyed by a covered loss like fire or theft. It may also provide assistance if someone is hurt in your home and cover temporary living expenses when your rental property is uninhabitable after a covered loss. Several factors affect how much renters insurance you need, including the replacement cost of your personal belongings. Bankrate’s insurance editorial team explains the ins and outs of renters insurance to help you decide how much is right for you.
How to decide how much renters to buy
Figuring out how much renters insurance you need requires time, effort and a little bit of math. You can start by creating a list, or inventory, of all of your possessions. Make a record of as much information as possible, such as dates of purchase, serial numbers, appraisal documents and receipts. Take photos of each item so you have proof of its condition. Include all your valuable possessions like computers, other electronic devices, home security systems, jewelry, instruments and appliances you’ve purchased. Use the internet to research how much it would cost to replace those items, and then use all the information you’ve collected to decide the minimum amount of renters insurance coverage that’s appropriate.
If after following the general guidelines above you still need help figuring out how much renters insurance you need, contact a licensed insurance agent.
For renters who own large dogs (over approximately 55 pounds) or a dog breed usually included on an aggressive or banned dog list, you may want to consider increasing your renters liability insurance due to the added risk. Finding renters insurance when owning certain dog breeds can be challenging, but some insurance companies are more dog-friendly than others, such as State Farm and USAA — they underwrite the dog’s behavior and history instead of breed.
Read more: Pets and renters insurance: why you need it
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How much does renters insurance cost?
According to the latest data available from the Insurance Information Institute (Triple-I), the average cost of renters insurance is $ $170 per year, or about $14 per month. Keep in mind that many insurance companies offer bundling discounts for renters who purchase their car insurance with the same company. When combined, the reduction in auto insurance premiums usually makes renters insurance even more affordable.
What affects the cost of renters insurance
While the average annual cost of renters insurance may be relatively low, several factors will ultimately determine how much renters insurance is for you. These include considerations for:
- ZIP code
- Credit-based insurance score (most states)
- Home inventory
- Deductible
- Rental size
- Actual cash value (ACV) vs. replacement cost value (RCV)
- Security and fire systems
- Pets
- Discounts
Other choices may also influence your renters insurance premium, such as the insurer you select and the amount of liability you opt for. By considering these factors, you can begin gathering quotes to get a more accurate estimation of what your rate will be.
Is renters insurance worth it?
Renters insurance covers many circumstances that make it worth consideration. While some people may assume that their personal belongings are not worth an additional monthly cost, the cost to replace everything you own due to a loss can add up fast.
Fire damage, water damage and theft are the most common claims from renters. In the event of a fire, your landlord would likely have a policy to cover their building and lost rental income, but you would be responsible for replacing any of your damaged or destroyed personal property. It may also reimburse you for items that are lost and stolen from your car or when you are away from home. Renters insurance also includes loss of use coverage, which can pay for additional hotel and living expenses if your residence is no longer inhabitable.
Renters insurance can also help protect your financial future from a liability loss. Most policies include personal liability coverage and medical expense coverage, usually in vastly different amounts. Liability coverage pays for attorney fees and damages or medical treatment for someone who gets hurt in your rented home where you are found liable. The standard liability limit is $100,000 but can be higher or lower depending on the carrier and the policyholder’s selection.
Medical payments coverage pays for medical-related expenses to someone who is injured in your home, but the fault isn’t necessarily yours. This coverage is typically listed at a lower amount, between $5,000 and $10,000, and is used as a way to pay for medical treatment quickly and hopefully avoid the more expensive and lengthy process of a lawsuit. Here is an example of how these types of claims differ:
- Personal liability claim: Your dog bites your house guest, who then has extensive medical bills
- Medical payment claim: Your house guest trips on your shoes that were left in the middle of the room and has a sprained ankle
How do I calculate renters insurance coverage?
An insurance agent can help you figure out exactly how much renters insurance you need, but Bankrate’s insurance editorial team has some general guidelines you can follow to get started.
Determine your desired deductible
The deductible of your renters insurance policy is that amount that you would be responsible for paying before the insurance company covers the rest of the cost. For example, if you have a $500 deductible and you filed a claim for damage from a fire, you would pay $500 towards the repair and the insurance company would pay the remaining cost. The higher the deductible, the lower your insurance premium, but make sure that it’s an amount you’d be comfortable paying out-of-pocket at any time.
Decide if you intend to purchase additional coverage
You can check whether your financial and personal possessions are sufficiently covered if you are affected by a disaster or involved in a lawsuit. If you do not think you have enough coverage on your renters insurance policy, you can also purchase an umbrella policy. This is an additional liability insurance policy that covers you when you reach the limit on your renters or auto insurance policies, and it also covers you for libel and slander.
Off-premises coverage for travelers
If you travel, it might be worth checking that you have off-premises coverage to insure possessions (such as a laptop or cell phone) that you take with you when you travel with the same coverage that you would have if you were using them at home.
Consider adding a floater
If you have expensive items or one-of-a-kind, collectible items like sports memorabilia, original artwork, antiques, expensive jewelry or furs, consider adding a floater to your renters policy. The floater adds additional coverage for more expensive items if they’re lost, damaged or stolen.
Double check your policy for additional living expense coverage
If you live in an area where there are natural disasters like fires or severe thunderstorms, it could be important that your policy includes enough insurance for Additional Living Expenses (ALE). Additional living expenses include paying for a hotel, eating at restaurants and other expenses from having to live away from your rental home while it is being repaired.
Insurers will pay the difference between your regular living expenses and your added living expenses from being displaced after a covered event, but they may only do so for a limited time. Read the fine print to make sure you have enough coverage for any anticipated future disaster. Also, consider checking that your insurance covers things like floods because not all policies cover every type of natural disaster. Flood damage is usually excluded from standard renters insurance policies, but may be purchased either through your provider or directly from the National Flood Insurance Program (NFIP).
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