Is renter's insurance worth it? Are you at risk without it? If so, what is the best renter's insurance? These questions and more are answered in this article.
At one time or another, most of us have been renters. And at one time or another, we've all wondered - do renters really need insurance? And am I really at risk if I don't have it? The answer might surprise you. If you're like me, you've probably also wondered what the best renter's insurance is, and is renter's insurance expensive? The time to find out these answers is today, as going without insurance can be one costly mistake.
The truth is, without renter's insurance, you are at risk. From liability, lawsuits, and property damage, without renter's insurance, you might be heading for a world of hurt. Or "cruisin' for a bruisin'" as my grandmother would say. But don't worry, this article will answer all the questions you have about renter's insurance. I've also included what I think the best policy is.
This post is all about: Is renter's insurance worth it?
1. Is Renter's Insurance Worth It?
This is a really common question, and one I asked myself when I first became a renter. No one wants to add another expense to their budget unless they know they are getting value in return. As a tenant, am I really liable if something happens? After all, I don't own the property, so shouldn't the landlord's insurance cover any damage or accidents? The surprising answer is NO.
So what exactly are you at risk of as a renter? For starters, whether you live in an apartment, condo, or house, you are at legal risk as a renter. One of the benefits of renter's insurance is called personal liability coverage. Let's say you have your new friend over to your rented apartment. She hands you her laptop, and you accidentally drop it. Did you know that she can sue you for property damage because it occurred in your apartment? It might sound silly, but it's true. If you have renter's insurance, it would cover all legal fees and settlement costs, to the limit of your policy. This also includes liability if a guest is injured in your home and requires medical expenses. I wouldn't want to be on the hook for those hefty hospital bills... If you're planning on having guests over, renter's insurance might be worth it.
Renter's insurance also covers damage to your personal property including your furniture, clothing, electronics, and other items in your rental unit. In the event of flooding caused by plumbing, a fire, or other covered event, your renter's insurance will reimburse you for the cash value of all property damaged. It will even cover your belongings if they are stolen! If you accidentally leave the sink on and flood your rental unit, your landlord can and will hold you liable for the damage, which can run into the thousands. This actually happened to my friend who left a potted plant in the sink she was watering. By not having renter's insurance, you leave yourself open to significant risk.
Finally, renter's insurance covers your living expenses in the event your rental unit becomes uninhabitable. This can happen if there is vandalism, a fire, earthquakes, tornadoes, or water damage. Your renter's insurance will cover the cost of temporary housing, even the cost of boarding your pet!
When all is said and done, is renter's insurance worth it? Yes, it is. It is worth the peace of mind. Knowing you’re covered means you can sleep at night instead of mentally calculating how many couches, laptops, and pairs of jeans you’d have to replace if disaster hit. If your apartment burns down and you lose all your belongings, the last thing you want to be thinking of is how you will pay for new housing or new furniture, or a new laptop for school.
2. Is Renter's Insurance Required?
The answer to this question will depend on your unique situation, including your landlord and the state you live in. As of right now, Oklahoma is the only state in which landlords cannot require renter's insurance. In all other states, your landlord can make renter's insurance mandatory.
Check with your landlord to see if renter's insurance is required. This might also be stated in your lease agreement and documentation. Next, look up whether or not it's required in your state to make sure you aren't accidentally breaking the law.
3. Is Renter's Insurance Expensive?
The short answer is no. For the amount of coverage offered by a typical policy (around $30,000 in personal property damage and $100,000 in liability coverage), the premiums for renter's insurance are dirt cheap. The average cost of renter's insurance is $10-$25 per month, about the cost of a large pepperoni pizza extra cheese please and ranch on the side.
4. Is Renter's Insurance a Fixed Expense?
Yes and no. Your renter's insurance is technically a fixed expense in the traditional sense, meaning it remains the same month to month or year to year for the duration of your policy. However, just like auto insurance, it can increase after you've had a claim, as you are now seen as a higher risk client. This occurs whether or not you were at fault (fun). You can expect your renter's insurance to increase by about 25% after a claim. So, if you were paying $12 a month, you will now pay $15. Keep in mind that this weighs against the cost of reimbursement for damages you already received, likely in the hundreds or thousands of dollars. That said, the chance of an increase in your premium is still far cheaper than having to pay for damages yourself.
5. How Much Renter's Insurance Do I Need?
This question is asking how much coverage, in the dollar amount, is indicated for your situation. And the answer is- it depends. When you apply for renter's insurance, just like other insurance policies, you can adjust your deductible and coverage amounts. The higher your deductible, the lower your premium. The higher coverage limits, the higher your premium. This is a cost-benefit analysis you have to do based on your own financial situation and the value of the items in your home. For example, if all your furniture is brand new from Restoration Hardware, you might want higher coverage for property damage. The typical policy covers $30,000 in property damage, which in that case would only cover 1/12 of The Cloud® couch.
6. Is Renter's Insurance Tax Deductible?
The short answer- nope. Renter's insurance is only tax deductible when it covers a place of business. For example, an office in your home out of which you operate a business (no, running your fantasy league does not count). And the IRS, militant as they are, only allows tax deductions for the exact square footage of the office space. So if your apartment is 800 square feet, and your office is 200 of that, only 1/4 of your renter's insurance is tax deductible. Thanks guys.
7. Do You Need Renter's Insurance for a House?
If you are a renter in a house, then yes you do! The risks and your liability are the same for a house as they are for a rented apartment or condominium. If you are a home owner, homeowners insurance is often not required, but it is usually required in order to get a mortgage. You, as a renter, are not covered by the homeowners policy.
8. Is Renter's Insurance Monthly or Yearly?
This is your choice! You can pay monthly for renter's insurance or you can pay in one annual installment. I recommend paying in one annual installment as you will pay significantly less. Insurance companies want your money now, so they will give you a discount if you pay upfront.
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