Do you know the costs of not having renters insurance?

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UPDATED: 2020-03-27T15:29:38.198Z
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Young couple looking at a laptop in the kitchen of their apartment.

When you live in a rental, whether it’s an apartment or a house, you might not realize that you need your own renters insurance, separate from your landlord’s coverage.

Alternatively, you may realize that your stuff won’t be covered by your landlord’s insurance, but you have so few possessions that you don’t think it’s worth the effort to get renters insurance.

In either case, you’re probably wrong. You might be surprised at how much not having renters insurance can cost you… and how inexpensive it is to protect your belongings. The cost of renters insurance is likely much less that you think, starting at $5/day from Lemonade.

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Do I need renters insurance?

The short answer is yes.

Renters insurance is about protecting your valued items. Your landlord has insurance designed to cover the structure of the rental and ensure that their business interests are protected. However, your landlord’s insurance won’t protect your things if they’re damaged in a fire or if they’re stolen.

Additionally, if you’re found personally liable for injury or property damage in a situation on the property, your landlord’s insurance won’t take care of that either. Your renters insurance can provide valuable protection in this situation.

Why do I need renters insurance?

Let’s get down to the specifics. Why do I need renters insurance, you may ask. If you don’t own a lot of things, you might be tempted to ignore the need. However, you might be surprised at how much it can cost you to not have renters insurance.

First of all, you might not think that you have a lot of things, but take a step back. Do you have a laptop? Perhaps you paid $1,500 for that laptop. What about your smartphone? What if you spent $700 for it? With those two items, that’s quickly $2,200 of personal property to replace if it were stolen or lost . If both of those things were destroyed in a fire, would you have the money to replace them tomorrow?

This is also true of your clothing, furniture, jewelry and other valuable items. Consider what would happen if your possessions were all severely damaged or destroyed or if some of the most expensive items were stolen. If you had to replace everything at once, could your budget handle it?

The chances are, your budget would take a big unexpected hit or require you to dip into your emergency fund. You could spend months, or even years, trying to replace those valuable items.

Plus, what if you’re on a phone payment plan and you don’t have additional coverage? For example, if you bought a new iPhone 11 Pro Max for $1,099 and you’re on a payment plan. After six months, you’ve paid off $275 but you still owe $824. If the iPhone is stolen out of your apartment, you still owe $824 on your phone in addition to needing to buy a new phone. Is $1,923 to get the same phone that you lost something you can afford?

With renters insurance, you would be compensated for the loss of the phone, enabling you to pay off what you still owe while setting you up to have the funds to buy a new phone.

Another important consideration is that your car insurance doesn’t usually cover items stolen out of your car. It seems counter-intuitive, but that’s the unfortunate case. This is one of the many commonly believed car insurance myths. If something valuable, such as your phone or tablet, were taken from your car, your car insurance policy wouldn’t pay to replace it. However, your renters insurance would.

What does renters insurance cover?

In general, there are three types of coverage you can expect with renters insurance:

  • Personal property: If your covered items are lost, damaged or stolen, the cost of replacement or repair will be covered. Fortunately, this coverage often applies even if you’re traveling. What if your laptop is stolen out of your car while on a road trip? Renters insurance will cover you.
  • Liability: Have you been found legally responsible for damage to someone else’s property or for their injury due to an accident? Your renters insurance might cover it.
  • Living expenses: If you can’t stay in your rental due to a covered problem, your policy might provide you with a stipend to stay elsewhere until the rental is habitable or until you find a new place.

All of these are expenses that can be hefty and cost you a lot of money. Renters insurance provides you with a way to protect your assets. If you end up having to stay in a hotel for a week while you look for a new place, that could wipe out your emergency fund, leaving you financially vulnerable down the road.

It’s not just about answering the question, “Why do I need renters insurance?” It’s also about thinking about the short-term and long-term impact on your financial situation if the unexpected happens. Renters insurance covers the costs that would otherwise set you back, potentially for years.

If you end up in debt because you either wiped out your emergency fund or you had to borrow to replace several items, the interest becomes another cost. Can you imagine paying off $5,000 in expenses put on a credit card for five years? You could easily end up paying more than $2,000 extra, just in extra interest.

How much renters insurance do I need?

When figuring out how much renters insurance you need, start with an inventory of your home. Consider how much it would cost to replace all of the items you have, including:

  • Laptops, tablets and computers
  • Furniture
  • Small appliances you own (coffee maker, toaster oven, etc.)
  • Kitchenware (how much would it cost to replace your plates and pans?)
  • Bedding
  • Clothing
  • Jewelry

Remember that it’s not necessarily about how much these items cost you, but consider the cost to replace everything. You might be surprised to discover that you could easily spend more than $10,000 to replace all the things in your apartment or rental home. Your parents might have given you an old couch for free, but if it’s destroyed in a fire, you might need hundreds of dollars to get a new one.

To get the most out of renters insurance, consider choosing replacement cost coverage rather than actual cash value coverage. Actual cash value coverage only pays out based on the market value of the items, which depreciate over time. Replacement cost, on the other hand, will protect you when you have to buy new.

To find the best renters insurance, check out the top renters insurance rankings in your zip code by visiting Clearsurance’s renters insurance rankings page. Read consumer reviews and understand the best options based on your specific rental needs.

For the most part, you want to get enough renters insurance coverage to replace your items, plus liability coverage that meets your needs. One guide might be to use your state’s car insurance minimums as a starting point.

What about more valuable items?

Carefully review your renters insurance policy for coverage limits. Some more valuable items, such as artwork, bicycles, business equipment and jewelry might require additional coverage. If you commute on a high-end bike that costs more than your run-of-the-mill bike from a department store, you might need to get separate coverage for added protection.

Consult with your renters insurance agent, call the Clearsurance number or visit the Clearsurance rankings page for help determining which items are more valuable than regular policy coverage would insure.

How much does renters insurance cost?

Now that you’ve answered the question, “Why do I need renters insurance?” it’s time to figure out how much it will cost you.

The good news is that renters insurance is relatively inexpensive. Similar to most insurance policies, your premium is based on how much coverage you choose, where you live, and other factors. However, it’s usually possible to find a renters insurance policy for as little as $10 to $5 per month.

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In some cases, it’s possible to save money on renters insurance by bundling it with other types of insurance. For example, if you have a car insurance policy with a company, adding renters insurance might result in a discount.

When you consider how cheap renters insurance can be, especially when compared to the cost of replacing everything, it seems clear that you can’t afford not to have this coverage.

Getting a renters insurance quote

You know that you need renters insurance and you have an idea of how much coverage you should get. Now it’s time to shop around for a renters insurance quote.

Pay attention to the level of coverage, the service you can expect, and whether there are additional discounts available. Shop around and compare renters insurance coverage and options.

You might be surprised to discover that you can get a great deal and protect your items. And that comes with peace of mind — which is priceless.

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