Do I Need Renters Insurance?

If you've got a mortgage, then you almost certainly have homeowner's insurance. And if you drive a car, you definitely have car insurance (we're all law-abiding readers here, right?). But what if you rent an apartment?

Most apartment complexes require tenants to have renters insurance, but not all landlords or property managers do. While the apartment owner will have insurance to cover the cost of any damages or repairs to the apartment itself, renters insurance covers any lost or damaged personal property in the event of a fire, thief, or natural disaster. Renters insurance also covers temporary living expenses in case you are displaced and medical expenses if someone is injured in your home or by something you own – if your satellite dish falls on someone, for example.

Renters insurance is relatively inexpensive. It can range anywhere from $10 to $20 a month depending on where you live and the amount of coverage you purchase. Some insurance companies require you to pay annually, some will accept monthly payments, and others will allow installment payments if needed.

There's no drawback to having renters insurance

If you can afford it, renters insurance should be an automatic for anyone renting an apartment. While you may not think all that highly of your stuff, the cost of replacing everything in the event of a fire or other disaster could be extremely difficult to manage. Perhaps more importantly, however, is the liability protection renters insurance can give you in the event you accidentally injure someone or destroy their property. 

While you'll hopefully never need to use it, good insurance can be a potential financial lifesaver in the event of a major accident or disaster.

What to look for when shopping for renters insurance

The key, however, is to make sure you have the right coverage. Buying too much or too little could end up hurting more than it helps, so before picking a policy be sure to consider these things:

Amount of coverage

Make an inventory of all the items in your home including bed, laptop, appliances, clothes, shoes, etc. If you have more expensive items in your home it’s worth buying a larger coverage amount. It's also a good idea to take pictures and keep receipts in case you need to make an insurance claim later.

Deductible

As with any insurance, you'll have a deductible on your renters insurance policy. A deductible is the amount you have to pay before insurance kicks in. Lower insurance premiums will have higher deductibles and vice versa, so pick the plan that best suits your financial situation.

Actual Cash Value (ACV)

This is the value of your items at the time of the loss. This means the insurance company will only pay you what the items were worth when they were damaged or stolen. Think about it as a depreciating value. You may have paid $600 for a laptop, but if it's only worth $20 when the damage occurred that's what you'll get. Don't get caught off guard if this is how your policy calculates payouts.

Replacement Cost

This is the amount of money you will need to replace your items. The insurance company will pay you the amount needed to replace items regardless of the current value.

Location

Just like with car insurance, if you live in an area that's more prone to theft you may pay more for renters insurance. Same goes for hurricanes, tornadoes, earthquakes, wildfires, or other natural disasters are common. The greater the potential threat, the higher the premiums.

Discounts

Many insurance companies will give you a discount if your apartment complex has a security gate, a sprinkler system, fire extinguisher, dead bolts, or if you also have auto insurance with the insurance company.

Animals

Owning pets can add to your premium. Some insurance companies will not cover certain breeds of dogs, or you may have to purchase additional insurance.

In the end, it’s usually best to be over-prepared than not at all. But if you're not sure that you can fit another payment into your budget, MMI offers free financial counseling 24/7, online and over the phone. It's a great way to get an unbiased perspective on your money habits and walk away with a new budget, helpful resources, and recommendations to help you improve your financial health.