Why Renters Insurance Really Matters

If you’re a recent college graduate, homeownership and all that comes with it – a mortgage, property taxes, trips to the hardware store – is probably not on your immediate radar. Home buying is a financial commitment and requires a certain level of stability that some young professionals might not have the luxury of boasting just yet. So for those of us who can’t commit to a hefty down payment or aren’t ready to commit to a certain geographic area, renting is a viable housing option.

In fact, the renting route might not just be for recent grads. 

rental agreement form

Although the American Dream of owning a home is still alive and well (7 in 10 renters aspire to this goal), a 2013 study from the MacArthur Foundation found that 57% of renters believe homeownership has become less attractive and 54% view renting as increasingly appealing. Current renters aren’t the only ones who see the allure; as more than half of the homeowners interviewed admitted they would consider renting in the future.

The American housing landscape is undoubtedly changing. Since 2009, 70% of our country’s biggest cities have experienced a rise in the number of households that rent.

But while the number of renters increases, more than half continue to skip the important step of adding a renters insurance policy to protect them and their valuables. These numbers warrant a deeper look into the importance of renters insurance.

Landlords and insurance: are YOU covered? Renters assume their landlords’ insurance policies cover the costs of damaged personal belongings. However, your landlord’s policy likely only covers disaster damage, such as fire, to the physical property and may not apply to your personal items. As a result, an increasing number of landlords are requiring their tenants to purchase a renters insurance policy, according to the vice president of the Insurance Information Institute.

Whether your landlord requires you to buy a policy or not, educating yourself on renters insurance can be worthwhile.

Where to begin?

Account for personal possessions. Standard renters policies typically offer minimum coverage of $25,000 for your possessions. Since your clothes, furniture, electronics and other possessions may cost more than that to replace, it’s a good idea to create a home inventory to determine the value of your stuff. A home inventory is simply a list of your personal possessions with their estimated values. Besides helping you determine the right amount of insurance to buy, keeping a detailed and accurate inventory is also important because it’ll make filing for a claim much easier. The Insurance Information Institute provides free software for creating a home inventory quickly and efficiently.

Note that renters insurance covers damages from disasters such as fire, lightning, vandalism, theft and certain types of water damage (i.e. your neighbor upstairs left his bathtub running). Since floods are not typically covered, consider enrolling in the government’s National Flood Insurance Program if you’re concerned about flooding in your apartment or the basement of your building.

If you possess expensive jewelry, rare collectibles or anything else of high value, consider adding a schedule as coverage for specific types of items may be capped in the standard policy. A schedule extends insurance coverage in the event these valuables are damaged, lost or stolen. Be sure to have each item appraised prior to adding a schedule as you will pay a premium based on the appraisal value. For more information on choosing the appropriate appraiser, check out this Consumer Reports article titled “How much is your stuff worth?”

Liability protection. In the unfortunate event you are sued by someone who was injured in your home, renters insurance can provide liability coverage. Your policy should cover some of the costs of court defense and court awards – generally limited too $100,000. You may purchase additional liability coverage as well.

Miscellaneous expenses. Renters insurance will likely cover additional living expenses (ALE) in the event your home is damaged and you have to temporarily move out. Such expenses include hotel rooms, car rentals, restaurants, and other similar costs incurred while living away from home. Some policies have a time limit for ALE coverage while others have a price cap- so be sure to read your policy carefully.

Discounts. For cost-conscious shoppers, consider inquiring about possible discounts with renters insurance. Companies usually grant discounts to renters who take preventative measures such as installing a security system, using smoke detectors, and having deadbolts on doors. Also, you could get a discount if you have a companion auto policy with a company.

Headquartered in Boston, Bunker Hill Insurance provides home, condo and renters insurance to customers in Massachusetts and Connecticut. Bunker Hill is a member of The Plymouth Rock Group of Companies, which together write and manage over $1 billion in property and auto insurance throughout the northeast.