The number of renters in the US has been steadily climbing over the past 10 years, bringing the total to nearly 43 million renters in 2015. There are many reasons why so many choose to rent: You avoid property taxes, maintain flexibility for career-driven relocations, and sidestep most hefty maintenance costs. What might come as a surprise, however, is that renters still hold their share of responsibility when it comes down to their personal property and their guests well-being. Yet only 40% of renters protect themselves with renters insurance - compared with 95% of homeowners - even though the national average premium for renters is less than $200 per year. You might not think you own much, but imagine having to start over from scratch. Do you really want to replace your furniture, clothes, kitchen wares, treasured tchotchkes?
1) Property Damage
Although your property manager is faced with the costs of repairing the building itself in cases of weather or accidental damage, your belongings are still your own. If a pipe bursts and soaks through your wall, ruining your clothes, your mattress, or your collection of vintage records, guess who has to pay to replace them? (Hint: It's not your landlord or the previous tenant who'd been slowly clogging the pipes for two leases.) Renters insurance covers your personal belongings from a variety of damage: lightning, smoke, water, fire, freezing, and - most surprisingly - volcanic eruption. If you have a few special belongings, like jewelry or an expensive collection of ceramic elephants, you can add a "floater" policy that provides extra coverage.
For replacement, most policies have two options: "actual cash value," which means that you'll get a check for what your used items were worth, or "replacement cost," giving you what similar items are currently priced. In cases where you might be found at fault for damage to your own belongings as well as the landlord's property, your renters insurance could protect you from that liability.
Much like damage, the theft of your personal property is also your responsibility. If someone breaks in and steals your TV or stereo it falls on you to replace them or to go without. But if you have renters insurance, you simply file a claim. The same goes for property that's not even kept in your apartment or rental - items stolen from your vehicle, for example, are still covered.
Most people assume that an injury on rental property would legally fall under the property owner's coverage. But that's not always the case. For example, if the lease agreement states that snow removal is the tenant's responsibility, and someone slips on the sidewalk, the potential lawsuit could fall to the tenant. Renters insurance would protect the tenant financially from the lawsuit, as well as aiding payment of medical expenses incurred. Likewise, if you own a dog, and friendly Fido unexpectedly bites the mailman, that could be covered, too. (Some companies and breeds, however, require additional coverage.)
4) Additional Living Expenses
Logically, if your apartment building burns down or is disassembled by a tornado, rebuilding the structure is not your problem. What a relief, right? Except for the fact that you're now homeless, albeit temporarily. This could mean moving into a hotel or subletting an apartment - and paying extra money to do so. Cue renters insurance. If you're displaced by a qualifying event, insurance will pitch in.
Auto insurance is mandatory in almost all 50 states (except New Hampshire), so you likely already have at least one insurance policy. Many insurance agencies offer multi-policy discounts, which would bring down your monthly payments and make it all the more affordable.
For everything that it does cover, there are a few exceptions to know about going in: Renters insurance specifically excludes flood damage (considered separate from water damage) and earthquakes, so speak with your agent about the risks in your area and if you'll need to purchase additional coverage. Furthermore, your roommate's belongings are also not covered, even if you split the purchase price of household furnishings. Before you open just one policy and claim your roommate's losses on their behalf, consider the financial repercussions, including higher premiums in the future for home or auto insurance.