Renters insurance doesn't cost that much, and it can save you from a world of hurt …
I rented an apartment for six years. My first year of graduate school I lived on campus and had about $15 of my teaching stipend left over every two weeks after paying for it. And I hadn't bought any food yet. (Thank goodness I had some savings!)
For the remaining five years of grad school I rented apartments, both with and without roommates. And my first year into my first big-boy job I rented an apartment.
Living on the edge (and not in a good way)
I lived in three different apartments for a total of six years, but was missing one thing the entire time.
Renters insurance.
I hadn't even heard of renters insurance until a few years ago when I hired a property manager to help me rent out our first house. None of my previous landlords required it, and I never bought it.
Had anything happened to the building — including fire, theft, roof caving in, tornado, etc. — and had any of my stuff been damaged, destroyed, or otherwise removed from my possession, I would have been completely out of luck. My landlords would have been covered for their buildings, but I wouldn't have been covered for anything.
They had, and took, no obligation whatsoever to insure my stuff. My stuff was my responsibility to insure.
Renters insurance not widely held
I was fortunate that I didn't need to find out the hard way about the importance of renters insurance.
At least I can take a small amount of consolation that I wasn't alone. According to a 2014 study by the Insurance Information Institute, only 37% of renters have a renters insurance policy in place. This is compared with a whopping 95% of homeowners who have a homeowners insurance policy in place.
This high percentage for homeowners isn't surprising for a couple of reasons. First, if there's a mortgage against a property, the lender will demand that it's insured. Secondly, a residential building is a giant purchase for most people. Not spending the few hundred dollars per year to insure a six-figure investment would be really, really stupid.
But renters insurance isn't that expensive, either. The same article from the Insurance Information Institute pegs the average cost of a renters insurance policy (in 2014) as $187 per year. A little over fifty cents a day. Not something that's going to break the bank all by itself.
Tips for buying and using renters insurance
Here are a few tips for making good decisions about renters insurance:
- If you're going to buy it, buy it now. If your stuff is stolen, or if a fire happens in your apartment complex, renters insurance does you absolutely no good if you haven't bought it yet. Seems obvious, but insurance companies won't pay out for a peril if the outcome is known.
- Inventory your stuff. If you need to file a claim, you'll need proof of ownership and proof of value. The Insurance Information Institute has a free app available at KnowYourStuff.org that simplifies the process of inventorying your things. Pictures and video go a long way. The bigger ticket the item, the more documentation you should have about it, but don't forget about the little things, too! They can add up.
- Place a value on your stuff. Doing this will determine how much insurance you'll need. If you want the insurance to be able to replace your stuff, then you'll need to estimate replacement value, and then buy replacement value coverage. If you just want cash value, then this insurance will be less costly, but depreciation will be factored in to the value of your things, and that will be less than replacement value.
- Decide how much coverage you're going to want. Make sure that the amount of insurance is enough to replace everything that's important to you. If there's the likelihood that you could lose everything, then consider getting coverage that will allow you to start over again. Estimate high.
- Check for exclusions and get riders if needed. Read the policy carefully! It will say exactly what is covered and what isn't — what types of events are insured against, and what types of items will/will not be replaced. Earthquakes may not be covered; if you live in California you might want to get that separately. Some kinds of valuables may not be covered; these can be insured separately for a price.
- Don't pay for the same insurance again other places. Your renters insurance policy may cover your stuff even if you're traveling with it. No need to pay for that kind of insurance again.
- You might get multiple-policy discounts. If you buy renters insurance from the same place that you have your car insurance, for example, they may give you a break on both policies. Ka-ching!
