Why Renters Insurance is Important


Homeowners insurance is one of the most valuable resources individuals can rely upon during a natural disaster, or any other incident resulting in a damaged house. According to Barbara Kiviat of Consumer Reports, the vast majority of U.S. homeowners — 95 percent to be exact — have policies in place to cover damage caused by natural disasters or theft.

Unfortunately, the percentage of renters who take advantage of a similar form of coverage is not nearly as high. Kiviat explains only 41 percent of U.S. renters have renters insurance. These renters would be wise to pay for renters insurance, as it covers a wide array of scenarios and offers an even wider assortment of benefits.

What is renters insurance?

According to Gino Zahnd, a contributor for the Huffington Post, renters insurance covers a renter’s personal belongings that could be damaged by fire or theft, as well as stolen items. Jean Folger of Investopedia notes how renters insurance is completely separate from a landlord’s property insurance. While the property insurance covers damage caused to the property itself, only renters insurance covers the items a tenant owns. Renters insurance provides benefits to landlords as well. Zahnd goes on to say if a tenant has renters insurance, the landlord’s insurance won’t have to cover the costs of damage created by a tenant.

Why do so few renters utilize renters insurance?

The low rate of renters insurance adoption among U.S. renters is due to a number of different reasons. Maggie McGrath of Forbes states that of the 59 percent of renters without renters insurance, a majority felt they didn’t need it, many thought it was too expensive and some simply hadn’t gotten around to it. Simply put, these lines of reasoning are plagued by misconceptions. For example, Folger states the average renters insurance policy costs $187 a year, making it one of the most affordable forms of insurance. What’s more, McGrath states, renters who do not utilize renters insurance stand to lose up to $15,000 by not opting in for coverage. Renters insurance is even becoming a requirement to rent apartments in certain parts of the country.

What does renters insurance cover?

Kiviat explains that the first step in choosing a renters insurance policy is to understand what is covered by that policy. While policies differ between providers, there are a standard set of benefits that almost all renters insurance policies cover. Damage caused by fire or theft are generally covered across the board. Folger does note many policies do not cover earthquake or flood damage, requiring a separate policy for those natural disasters. There are other even less commonly known benefits. For example, many renters insurance policies provide additional living expenses if a tenant is displaced from their current abode, helping pay for the costs of hotel rooms while repairs are performed.

What is liability coverage?

As beneficial as all these forms of coverage are, Maryalene LePonsie of U.S. News claims the most important benefit of renters insurance is liability coverage, which helps protect policy holders from legal action and damages resulting from an accident at their rented property. For example, if someone is injured in a tenant’s apartment or if that tenant accidently causes a fire in their apartment, liability coverage can cover any court costs or legal expenses. As these costs can quickly add up, this is a good tool to have when facing legal woes. Folger states most renters insurance policies provide at least $100,000 in liability coverage. If even more coverage is required, many insurance companies can initiate an umbrella policy to add more coverage to those rising costs.

With all of the benefits that renters insurance can provide, there is little reason for tenants not to opt into this fairly affordable form of insurance.

 

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