Headline: Oh, It’s Just a Rental: Renter’s Insurance Can Be Important

Date: 12/21/2020

Body: This one hits close to home, literally.   I found a great article on The Penny Hoarder about the importance of Renter’s Insurance.  (Link is below.)

What Is Renters Insurance? An Ultimate Guide to Finding a Policy (thepennyhoarder.com)

Why is Renter’s Insurance So Important?

Most likely, the Landlord already has insurance to cover the value of the home.   After a disaster, they will be made whole.   But a Renter’s policy will pay for your losses.  Without doubt, after a disaster you will have to replace all of your clothes, shoes and the household items that were damaged in the disaster.  A renter’s insurance policy normally covers your personal property (up to a certain amount), liability coverage, and will cover your temporary accommodations while repairs are being made.  Even given this broad coverage, the policies tend to be relatively inexpensive.

Nationally, this is a problem.  In one study, 95% of homeowners had policies, but only 40% of renters had a renter’s policy.  For you, personally though, if there is one room for rent, and you are competing with another prospective tenant, your renter’s insurance policy does give the landlord more protection, and you can bring this to the attention of your landlord.  He or she will thank you for it.

Renter’s Insurance actually covers a few things that I wouldn’t have thought of.

1. Medical expenses for injured guests (up to a limit of $1,000-$5,000 depending on your policy.)
2. Damage your kid causes to others.  (Mine’s an angel, NEVER does ANYTHING  wrong or illogical.  Yours might be different.)
3. Dog Bitesà If you have a dog who is over-protective of your space, and there is a bite, you will usually be covered.  Do check your policy for details.
4. Occasionally, you do rent “stuff” or long-term “borrow” it from roommates.   If it is in your possession, it is covered.

So, what doesn’t it cover?

If you have a very expensive (portable) item, like a really nice tennis bracelet, bedecked with diamonds, you might want to have a separate policy on that item alone.

How expensive is “relatively?”

Per the National Association of Insurance Commissioners, these policies range from $15-$30 per month.  Nothing to sneeze at, to be sure, but 2-3 trips to the local coffee shop avoided can instead buy you peace of mind.  Not a bad deal.

The exact amount largely depends upon a few factors:

1.  Locationà  Your location will be at either a high or low risk of crime and environmental-related damages.   Both risks will be weighed as a factor in your premium calculation.
2. Amount of Coverageà Every person has a different amount of “stuff” to cover.   My current neighbor is a clothes horse and would likely need a lot of coverage.   When I lived closer to DC, my roommate moved in with 2 large suitcases and an older laptop.
3. Deductibleà If you choose a higher deductible level, your premium will likely be reduced.   (Think of a balloon, squeeze one end down, and the other end inflates greatly.)
4. Your Credit Scoreà Your prospective insurance company will use your credit score as a measure of risk as well, and the higher your score, the lower they will assume their risk will be (and your premiums will be less as a result.)
5. Previous Claims Historyà If you had a lot of claims in the past, the company presumes that you will expose them to a lot of risk in the future, and your premiums go up. 
6. Replacement Costà Insurance policies will offer benefits to replace your household goods either at the “replacement cost” or the “actual cash value” level.    For instance, you might’ve paid $225 for the Members Only jacket back in the day, but, it’s not worth that anymore.   So, if you go with the “replacement cost” the company will pay you the $225 (or close to it), but if you go with the “actual cash value”, you might get $60-$80 for it.  Unsurprisingly, the second option offers much lower premiums.  (Not to cast aspersions on Members Only, I still have one. It’s my favorite, still.)

 Are there ways to save on Policies?

In a word, yes.

1. You could bundle your policiesàIf you purchase both Auto and Renter’s policies from the same vendor, they are likely to give you a deal.
2. Sometimes there are special discounts for certain professions.  Please don’t hesitate to ask, but, be honest about what you do.  Not everybody is a police officer who is a National Guard Chaplain on the weekends.
3. Ask about a Claims-Free Discountà If you go a certain period of time without filing a claim on your renter’s policy, the company might reward you with a lower premium.  It never hurts to ask.

What if there IS a theft loss or damage?

Report it immediately.   Always, if there is any loss or damage, report it immediately to your landlord.   If it is a theft loss, please file a police report as soon as you can.   Then, once filed with the police, within 72 hours of discovery, call your insurance company.  This gives you the best chance of getting your valuables back.  Do everything in your power to document the extent of your financial loss.

REFERENCES

7 Little-Known Benefits of Renters Insurance – NerdWallet

The Benefits of Renters Insurance | Apartments.com

6 Reasons Every Tenant Should Have Renter’s Insurance (thebalancesmb.com)

Renters’ Insurance Claims for Damaged or Stolen Property | Nolo

Editor’s Note: The information in this blog should not be construed as tax advice.   Each individual has attributes that could change the recommendations in a material manner.  For this reason, please enjoy this blog, but before taking action, consult a CPA or tax professional to discuss the details of your situation.