Credit: Renters account for roughly 43 million households in the U.S. and while only 40% of renters have renters insurance, the number is slowly climbing. More and more people are shopping for renters insurance and there are a number of things tenants should keep in mind before purchasing a policy.
Gain a full understanding of what it covers
Before shopping and comparing renters insurance policies, a renter should have a firm understanding of what the policies cover.
Generally, renters insurance covers personal belongings, legal fees and damages stemming from a lawsuit, and living expenses if their home becomes uninhabitable. But not all renters insurance policies are the same. Some might have different limits for each coverage included in the policy, which might have an impact on which policy they choose to purchase.
For example, two renters insurance policies might cost the same, but one might have a higher personal property limit. A renter who sees more benefit in the higher personal property coverage might find that policy more appealing.
Equally as important is understanding what a renters insurance policy won’t cover. Flooding, earthquake damage are not covered by renters insurance. Those perils are covered by separate insurance policies: flood insurance and earthquake insurance, respectively. Sinkholes are also excluded but separate policies exist to cover those, too.
Accurately calculate the value of belongings
This tends be easier for renters than it is for homeowners because they usually have smaller homes and fewer belongings. The challenge is remembering to calculate the value of personal property and doing it accurately.
The process for renters is even slightly different than it is for homeowners. Renters tally their belongings covered and then purchase the amount of coverage needed. Homeowners insurance covers a dollar amount of personal property up to a percentage of the replacement cost; they effectively have to figure out if their personal property is worth a predetermined amount or not.
Making a list of all belongings, including furniture, electronics, firearms, instruments and other things, is key to buying enough coverage. Most people have some idea of the value of their property, they just forget to consider it.
However, it’s important to document all items with photos, receipts and detailed written descriptions to ensure a full claim is paid by an insurer.
The value of personal property categories or a single item might also surpass limits set by an insurance company. In that case, renters need to consider purchasing endorsements or floaters to ensure their personal property is fully insured.
Every roommate needs their own policy
One of the most commonly misunderstood things about renters insurance is that it does not cover roommates. Coverage is exclusive to relatives who reside in the rental property with the policyholder.
All roommates need to purchase their own policy.
In the event of a loss, such as a fire, only the belongings of roommates who purchase renters insurance will be covered. And lying about what property roommates own is not an option. First of all, that would be fraud. Secondly, insurance companies check receipts and even administer legal depositions for a claim.
Roommates also typically have all of their names on a lease, which makes all of them liable for lawsuits.
For example, say one roommate damages an apartment. The owner of the property might not know who caused the damage, so they might sue all the tenants on the lease. Renters insurance liability coverage would cover the legal fees and damages associated with such a lawsuit, but only for the policyholder. Roommates without renters insurance would face the expenses of the lawsuit as out-of-pocket costs.
Most renters insurance polcies offer at least $100,000 in liability protection, which considering the cost of the policy and what else it covers, is relatively a lot. The average annual renters insurance premium in the U.S. is $187.
The article 3 Things to Remember When Shopping for Renters Insurance originally appeared on ValuePenguin.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
