What Does Renters Insurance Cover?

There are a lot of good reasons to get renters insurance. In fact, some of the biggest benefits might pleasantly surprise you. Read on to learn more.

Renters insurance is all about being prepared for the unexpected. Unfortunately, mishaps like theft, break-ins, or lightning strikes aren’t always preventable. That’s where renters insurance comes in handy.

Curious if it’s really worth the investment? Here’s everything you need to know about how it works, what it really covers, and what it typically doesn’t.

What Is Renters Insurance?

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Renters insurance is a type of insurance that covers the loss of personal belongings in case of damage to your rented home. It covers various other rental-home-related expenses, such as hotel bills incurred if your home becomes unlivable. It can also provide liability coverage for certain rental-home-related accidents.

If you’re wondering if it’s similar to homeowners insurance, the basic answer is yes. But there’s one main difference. Renters insurance does not cover the building itself. Whether it’s an apartment, house, condo, duplex, townhouse, or mobile home, renters insurance only applies to personal belongings kept in the property.

What Does It Cover?

Also known as tenant insurance, renters insurance primarily covers the unexpected costs of repairing or replacing personal possessions after they’ve been damaged by a covered peril. Personal liability coverage is also a key feature. For instance, if someone is injured in your home, renters insurance can help with medical bills.

Or, if you’re temporarily forced to live elsewhere for reasons beyond your control and due to damage to the residence, renters insurance can cover those expenses, too.

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While policies vary, some items you can protect with personal property coverage include, but aren’t limited to:

  • Clothing
  • Money
  • Appliances
  • Electronics
  • Jewelry
  • Houseware
  • Furniture
  • Collectibles (trading cards, coin collection, etc.)

In some cases, insurers will extend coverage to personal belongings that are stored in an off-site storage unit or, as previously mentioned, in other places, such as your vehicle, a backyard shed, or even a hotel room in a different state.

In fact, renters insurance can cover your possessions wherever you are, and not just when you (or your possessions) are at home. For example, if your laptop is stolen from your car, renters insurance can help with the cost of a replacement.

Is It Required?

Renters insurance is not required by law, but some landlords do require tenants to obtain it as a mandated condition of the lease agreement. This way, landlords are able to minimize their own liability for accidents and unforeseen incidents that the tenant or the elements (like a hail storm or forest fire) may cause.

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The only time renters insurance is required is when the landlord or rental company requires the tenant to have it. But even when it’s not required, you should consider signing up for it.

Having renters insurance isn’t just for the landlord’s benefit. It’s in the best interest of the renter. Without coverage, landlords are able to charge tenants whatever they deem necessary for not having renters insurance and hold tenants financially responsible for whatever mishaps occur.

Also, if you decide to move, your renters insurance moves with you. If you wish to opt-out, you’ll be able to anytime. Many policies offer the option of signing on month-to-month or annually. Considering all of the additional benefits typically offered, renters insurance often proves itself to be worth holding onto.

Additional Coverage

As noted above, most renters insurance policies come with liability coverage, too. Beyond the most basic plans, policies may pay for legal fees and medical expenses. For instance, if a visitor gets injured in your home or if you’re held legally responsible for property damage elsewhere.

Personal property coverage is the primary purpose of renters insurance, but it only covers your damaged items. With liability insurance, you’re able to avoid paying out of pocket for damages that you (or anyone in your household) might’ve caused to someone else and their property.

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Most of the time, insurance companies offer additional coverage as a supplementary aspect of a policy to further protect renters and their belongings. Generally, add-ons are there to cover perils not included in your standard policy, or they’re applied to increase basic coverage limits.

The most common add-ons include damage to another rental property, hotel bills, restaurant bills, temporary storage units, pet boarding, rented furniture, and laundry expenses.

And in many cases, renters insurance will let you add identity theft protection to your active policy.

Identity Theft Protection

This additional coverage can help cover the cost of restoration to your identity following a cyber attack, system breach, or identity theft.

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As noted by Yahoo! Business, identity theft coverage may reimburse you for the re-issuance of your government ID, unforeseen legal fees, attorney costs, lost wages, fraud specialist fees, loan reapplication fees, lost data expenses, and system restorations.

With certain companies, you may also be able to obtain credit monitoring services with this type of add-on.

Special Protection for Your Most Prized Possessions

With more expensive items, basic coverage may not be enough. That’s why scheduled personal property coverage might be worth adding. It’s designed to increase the liability limit for specific items or special categories that might already be accounted for in your policy but don’t have enough coverage for full reimbursement.

For example, collectibles or jewelry may be covered up to $1000 – $1,500 per item. If something you own costs more than that or you have an irreplaceable family heirloom to protect, you may want to add an endorsement to make sure your most prized possessions are noted and fully covered.

Endorsements allow you to raise the basic limit to a higher amount. In turn, you’d be reimbursed the full cost of the special or pricey items.

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If you need to increase the coverage limit for one item only, like an autographed baseball card, a scheduled floater might be worth consideration. A scheduled floater increases the policy limit for the singular item, but that’s not all. The floater can also provide comprehensive coverage that typical policies don’t offer, such as coverage in case of accidental loss.

There’s another option for coverage related to high-value. It’s known as umbrella insurance. This unique and all-encompassing type of coverage can take care of remaining expenses when your regular existing policy has reached its coverage limit. Oftentimes, this property safeguard also enhances your basic coverage for other potential perils, such as liability issues.

While renters insurance can protect you from many of life’s mishaps, there are a few things that the average policy almost never covers.

What’s Not Covered?

While the damage caused by many natural disasters and perils are covered, there are a few that typically don’t make the cut. When you are looking into policies, make sure that you know the specific limits going in.

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For instance, you will likely need to purchase flood or earthquake insurance separately. Volcano eruptions, sinkholes, landslides, and other disastrous incidents where the earth has moved are rarely covered, but in some cases, you can find add-ons to cover events like these.

Some companies offer things like earthquake damage coverage as a specific add-on, so do your research and find the company with policies that best suit you and your family’s needs.

While you may be protected in the event you’re held responsible for causing someone else injury in an accident, car insurance is not included. Also, if you have a roommate, your renters insurance doesn’t apply to them or their property. Even in joint policies, all coverage amounts are separate.

If you work from home, any item used solely for business purposes won’t be covered either, including your work computer or equipment.

How Reimbursement Works

In most cases, renters insurance will reimburse qualifying losses to personal property in two ways: cash value or replacement cost.

Actual cash value takes into account the depreciation of your personal belongings at the time of the claim. In other words, you’ll be reimbursed based on the current market value of your belongings, which could be less than what you may need to purchase the item again. On the plus side, it’s the least expensive option.

Replacement cost coverage covers the total amount you’ll need to purchase the same (or comparable) item, without factoring in or deducting depreciation. Because the reimbursement will be notably larger, the monthly premiums are usually higher.

Is It Worth Getting?

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Renters insurance keeps you financially covered where your landlord’s own insurance cannot. Landlord insurance is designed to cover damages to the rental property, but not to you, your belongings, your pets, or a visitor’s injury on the property.

Of all the reasons to get it, affordability is a big one. Renters insurance tends to be relatively cheap. According to the National Association of Insurance Commissioners (NAIC), the average cost is about $15 monthly or under $200 annually for basic coverage.

Ultimately, it’s always better to be safe than sorry. As we all know too well, accidents and natural disasters tend to occur when we least expect them. For those renting a home, that reality alone makes renters insurance a fool-proof investment every time, no matter what happens.

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