Skipping Renters Insurance? Why That’s a Bigger Risk Than You’d Think

Young Couple Moving In To New Home Together

As a finance writer, I am surrounded by people who know a lot about managing money. But even those with the most money know-how can still miss financial must-haves.

For instance, in a recent conversation, a few of my coworkers stated they didn’t have renters insurance. This puts them among the 59% of renters who don’t have renters insurance, according to a poll from the Insurance Information Institute. On the other hand, 95% of homeowners carry homeowners insurance.

Granted, renting comes with fewer property responsibilities than owning. But don’t assume you can skip insurance for your home simply because you’re leasing it. Go without it and you’ll expose yourself to some major risks.

See why opting for a policy is protection you can’t live without, and learn how renters insurance can help smooth over the following five major renting crises.

1. Damaged Belongings

If you’re asking yourself whether you need insurance as a renter, a better question might be, Can you afford not to have it?

If the relatively small cost of a renters insurance premium—typically between $15 and $25 per month—seems too expensive, consider the alternative, suggests John Espenschied, agency principal of Insurance Brokers Group.

“Imagine replacing all your clothes, furniture, electronics, food, personal items, and priceless personal memorabilia,” he says. With renters insurance, the insurer will cover most or part of the value of damaged items. Without this coverage, you’re completely on the hook for all those costs.

Espenschied tells a story of one of his clients, a young woman to whom he recommended rental insurance multiple times. She declined the coverage.

Months later, there was an electrical surge in the building. “It took out everything she owned that was plugged in, including the TV, computer, and several other items,” Espenschied explains. These items were permanently damaged and unusable.

Had she opted for renters insurance, Espenschied could have helped her submit a claim and get the money to replace those belongings. Unfortunately, without the policy there was nothing he could do.

Don’t put yourself in the same position—get a renters insurance policy. On top of that, take steps to document all belongings and valuables so you can prove ownership in a renters insurance claim.

2. The Temporary Loss of a Habitable Home

Some disasters—such as fires, flooding, and electrical issues—can require extensive repairs and render your rental uninhabitable. Your landlord will usually handle these repairs, but if you lose the use of your home, your landlord might only be required to refund a prorated rent for the days you can’t live in your rental.

But if you’re out of a place to live, your daily rent rate might not cover any decent hotels or other temporary housing options.

But there’s good news: “Most renters insurance policies can help you in the event something happens to your apartment or house and you have to live elsewhere while it’s repaired,” says Jennifer Fitzgerald, CEO and cofounder of insurance comparison site PolicyGenius.

Typically, you can find a hotel nearby and your renters insurance will cover the costs of your stay until you can resume habitation of your home.

3. Stolen Belongings

Renters insurance typically includes coverage for theft and burglary too. If your home is broken into or burglarized, you can file a claim with your renters insurance provider to replace any stolen or damaged items.

“It even covers your belongings when they’re not physically in your home,” Fitzgerald says. “So if you take your laptop with you to the local coffee shop or on vacation and it’s stolen, your policy could help cover the costs of getting it repaired or replaced.” Renters insurance will usually be the policy that covers theft of personal items from your car too.

If your home is broken into or your purse is stolen from your car, promptly notifying authorities is an important step—filing a renters insurance loss claim will usually require a police report of the theft.

4. Personal Liability for Legal Damages

The most important protection your renters insurance provides, however, might be personal liability protection.

“If your dog bites someone or a food delivery person slips and falls, you’re covered,” says Stacey A. Giulianti, chief legal officer for Florida Peninsula Insurance. Instead of being held personally responsible for those damages, your insurer will step in and help. “The carrier will even hire and pay for an attorney to defend any resulting lawsuit.”

This can be especially important if you are found responsible for damage to adjacent properties as well, Espenschied says. For example, renters insurance will cover you if your toilet or tub “overflows and leaks into the neighbor’s unit below, causing damage to their personal property and cost to repair the building.” You may also be covered if a kitchen fire in your apartment causes damage to the unit above you.

The damage and loss can easily add up to tens of thousands of dollars. In cases like these, renters insurance can be the difference between smooth recovery and huge financial loss or even bankruptcy.

Make sure you understand your coverage. “Every policy is different, so talk to an agent and read your policy terms,” Giulianti warns.

5. An Eviction for Violating Your Lease Agreement

Many lease agreements include a clause in which the tenant agrees to purchase a renters insurance policy. These common clauses usually clarify that the landlord’s property insurance coverage does not extend to your personal belongings.

If you sign a lease with such a clause, you are agreeing to maintain this insurance coverage throughout your residency there. If you fail to get a policy or allow it to lapse, your landlord is within their rights to serve you with a “comply or quit” notice and possibly begin eviction proceedings.

If you don’t currently have a policy, reconsider getting renters insurance. Alongside a healthy emergency fund, having the right insurance can bring vital financial security to your life. For the cost, renters insurance provides protection and peace of mind.

“Most renters can get a policy for around $20 per month,” Fitzgerald says. “That’s a small price to pay when you think about the fact that if you don’t have renters insurance, you’ll be forced to cover the cost of replacing any and all items damaged.”

Procuring a renters insurance policy is a smart step toward financial security. With the right policy, you can avoid debt in an emergency and protect your possessions and your home. If you’re ready to buy a home, learn more about the ins and outs of home mortgages in Credit.com’s Mortgage Loan Learning Center. And to be financially prepared for anything, it’s also a good idea to build your credit score so you can qualify for loans and other credit when necessary. See where you stand with a free credit score from Credit.com.

Image: istock 

The post Skipping Renters Insurance? Why That’s a Bigger Risk Than You’d Think appeared first on Credit.com.

Skipping Renters Insurance? Why That’s a Bigger Risk Than You’d Think

Young Couple Moving In To New Home Together

As a finance writer, I am surrounded by people who know a lot about managing money. But even those with the most money know-how can still miss financial must-haves.

For instance, in a recent conversation, a few of my coworkers stated they didn’t have renters insurance. This puts them among the 59% of renters who don’t have renters insurance, according to a poll from the Insurance Information Institute. On the other hand, 95% of homeowners carry homeowners insurance.

Granted, renting comes with fewer property responsibilities than owning. But don’t assume you can skip insurance for your home simply because you’re leasing it. Go without it and you’ll expose yourself to some major risks.

See why opting for a policy is protection you can’t live without, and learn how renters insurance can help smooth over the following five major renting crises.

1. Damaged Belongings

If you’re asking yourself whether you need insurance as a renter, a better question might be, Can you afford not to have it?

If the relatively small cost of a renters insurance premium—typically between $15 and $25 per month—seems too expensive, consider the alternative, suggests John Espenschied, agency principal of Insurance Brokers Group.

“Imagine replacing all your clothes, furniture, electronics, food, personal items, and priceless personal memorabilia,” he says. With renters insurance, the insurer will cover most or part of the value of damaged items. Without this coverage, you’re completely on the hook for all those costs.

Espenschied tells a story of one of his clients, a young woman to whom he recommended rental insurance multiple times. She declined the coverage.

Months later, there was an electrical surge in the building. “It took out everything she owned that was plugged in, including the TV, computer, and several other items,” Espenschied explains. These items were permanently damaged and unusable.

Had she opted for renters insurance, Espenschied could have helped her submit a claim and get the money to replace those belongings. Unfortunately, without the policy there was nothing he could do.

Don’t put yourself in the same position—get a renters insurance policy. On top of that, take steps to document all belongings and valuables so you can prove ownership in a renters insurance claim.

2. The Temporary Loss of a Habitable Home

Some disasters—such as fires, flooding, and electrical issues—can require extensive repairs and render your rental uninhabitable. Your landlord will usually handle these repairs, but if you lose the use of your home, your landlord might only be required to refund a prorated rent for the days you can’t live in your rental.

But if you’re out of a place to live, your daily rent rate might not cover any decent hotels or other temporary housing options.

But there’s good news: “Most renters insurance policies can help you in the event something happens to your apartment or house and you have to live elsewhere while it’s repaired,” says Jennifer Fitzgerald, CEO and cofounder of insurance comparison site PolicyGenius.

Typically, you can find a hotel nearby and your renters insurance will cover the costs of your stay until you can resume habitation of your home.

3. Stolen Belongings

Renters insurance typically includes coverage for theft and burglary too. If your home is broken into or burglarized, you can file a claim with your renters insurance provider to replace any stolen or damaged items.

“It even covers your belongings when they’re not physically in your home,” Fitzgerald says. “So if you take your laptop with you to the local coffee shop or on vacation and it’s stolen, your policy could help cover the costs of getting it repaired or replaced.” Renters insurance will usually be the policy that covers theft of personal items from your car too.

If your home is broken into or your purse is stolen from your car, promptly notifying authorities is an important step—filing a renters insurance loss claim will usually require a police report of the theft.

4. Personal Liability for Legal Damages

The most important protection your renters insurance provides, however, might be personal liability protection.

“If your dog bites someone or a food delivery person slips and falls, you’re covered,” says Stacey A. Giulianti, chief legal officer for Florida Peninsula Insurance. Instead of being held personally responsible for those damages, your insurer will step in and help. “The carrier will even hire and pay for an attorney to defend any resulting lawsuit.”

This can be especially important if you are found responsible for damage to adjacent properties as well, Espenschied says. For example, renters insurance will cover you if your toilet or tub “overflows and leaks into the neighbor’s unit below, causing damage to their personal property and cost to repair the building.” You may also be covered if a kitchen fire in your apartment causes damage to the unit above you.

The damage and loss can easily add up to tens of thousands of dollars. In cases like these, renters insurance can be the difference between smooth recovery and huge financial loss or even bankruptcy.

Make sure you understand your coverage. “Every policy is different, so talk to an agent and read your policy terms,” Giulianti warns.

5. An Eviction for Violating Your Lease Agreement

Many lease agreements include a clause in which the tenant agrees to purchase a renters insurance policy. These common clauses usually clarify that the landlord’s property insurance coverage does not extend to your personal belongings.

If you sign a lease with such a clause, you are agreeing to maintain this insurance coverage throughout your residency there. If you fail to get a policy or allow it to lapse, your landlord is within their rights to serve you with a “comply or quit” notice and possibly begin eviction proceedings.

If you don’t currently have a policy, reconsider getting renters insurance. Alongside a healthy emergency fund, having the right insurance can bring vital financial security to your life. For the cost, renters insurance provides protection and peace of mind.

“Most renters can get a policy for around $20 per month,” Fitzgerald says. “That’s a small price to pay when you think about the fact that if you don’t have renters insurance, you’ll be forced to cover the cost of replacing any and all items damaged.”

Procuring a renters insurance policy is a smart step toward financial security. With the right policy, you can avoid debt in an emergency and protect your possessions and your home. If you’re ready to buy a home, learn more about the ins and outs of home mortgages in Credit.com’s Mortgage Loan Learning Center. And to be financially prepared for anything, it’s also a good idea to build your credit score so you can qualify for loans and other credit when necessary. See where you stand with a free credit score from Credit.com.

Image: istock 

The post Skipping Renters Insurance? Why That’s a Bigger Risk Than You’d Think appeared first on Credit.com.

Guide to Renters Insurance: When You Need it and When You Don’t

If you’re currently renting, you may not have given much thought to buying insurance for your place. After all, your landlord is the one who owns it. Shouldn’t he be the one buying insurance?

The truth is that while your landlord almost certainly does have insurance, it doesn’t cover all the risks that you personally face. And that’s where renters insurance comes in.

Renters insurance is inexpensive and provides a number of financial protections you can’t get elsewhere. It’s something that just about every renter should consider, and in this guide we’ll cover the following:

  • What Is Renters Insurance?
  • What Does Renters Insurance Cover?
  • How to Get Renters Insurance

What Is Renters Insurance?

If there was a fire in your place, or if someone broke in and stole something, who would be responsible for the damages?

Your landlord almost certainly has an insurance policy that would cover the cost of repairing the apartment itself. His insurance would pick up the tab for fixing or replacing the walls, floors, ceilings, and other structural components of the apartment. He would restore it to the empty apartment that existed before you moved in.

But, of course, you don’t live in an empty apartment. You own most of what’s inside it, furniture, clothes, your laptop, and everything else.

That’s where renters insurance comes in. Renters insurance covers the financial loss you could personally face if your apartment was damaged or burglarized.

Specifically, renters insurance covers:

  1. The cost of replacing your possessions.
  2. The cost of living somewhere else if your rental becomes temporarily unlivable.
  3. Your financial liability if someone gets injured while at your apartment, or if you accidentally injure someone or their property while you’re away from your apartment.

And the good news is that all of that coverage comes pretty cheap. According to the National Association of Insurance Commissioners, renters insurance premiums average just $15-$30 per month, though your specific premium will depend on where you live and what you’re covering.

So, how exactly do each of those protections work? Let’s dig in.

Renters insurance only protects you from certain kinds of damages. These are called named perils, and while every policy differs, here’s a list of common perils that are covered:

  • Fire and lightning
  • Windstorm or hail
  • Accidental discharge or overflow of water or steam
  • Earthquake
  • Explosion
  • Smoke
  • Aircraft
  • Vehicles
  • Collapse of building
  • Theft
  • Vandalism and malicious mischief
  • Riot and civil commotion
  • Falling objects
  • Sudden and accidental tearing apart, cracking, burning, or bulging
  • Freezing
  • Sudden and accidental damage from artificially generated electrical current
  • Volcanic eruption

This is just a generic list, and your specific policy may name different perils or define them slightly differently. Whatever your named perils are though, your renters insurance will only cover damages that result from one of those perils that is specifically listed in the policy. If damage results from some other cause, it will not be covered.

Certain types of perils, like flooding, may not be covered by your base policy but could be covered by an additional policy. You’ll have to review the details of your policy to see what is specifically covered, and what, if any, additional perils you may want to insure against.

Now let’s get into the specific protections that renters insurance offers.

Protection #1: Your Property

While you don’t own your home, you do own most of what’s inside of it. And when you add up the value of all your clothes, furniture, electronics, dishes, appliances, and everything else, you probably own a significant amount of property.

If any of that property was damaged or stolen, your renters insurance would help pay to replace it. Your landlord’s insurance would not.

When you buy renters insurance, you buy a certain amount of personal property coverage. For example, you might get $30,000 of coverage, in which case your renters insurance would reimburse you up to $30,000 for damage caused to your personal property. Without that coverage, you would have to foot the bill yourself.

Wisconsin’s Office of the Commissioner of Insurance offers a Personal Property Home Inventory form that can help you determine how much personal property coverage you need and create a record that can be used if you ever need to file a claim. Keeping photos of particularly valuable items is also a good idea, just in case your insurance company asks for more proof.

It’s worth noting that most renters insurance policies have coverage limits for certain types of property like jewelry and artwork. For example, it’s common for the policy to limit its jewelry coverage to $1,000 per item.

In that case, you can add a rider that covers specific pieces of property that exceed those limits. So if you have a $5,000 engagement ring, you would have to ask the insurance company to add coverage specifically for that item, which would come with a small increase in premium.

You will also likely have a deductible on your policy, which is the amount of money you would have to pay out of pocket before your insurance kicks in. For example, a $500 deductible means that you would be responsible for paying the first $500 in damages, and your renters insurance would reimburse you past that amount, up to your total personal property limit.

Protection #2: Your Cost of Living

Let’s say that there was a fire and your home became temporarily uninhabitable. While you wouldn’t be responsible for repairing the house or apartment, you would be responsible for finding somewhere else to live in the meantime.

This is the second big area where your renters insurance would kick in.

Renters insurance has something called loss of use coverage that would provide payments to help you cover that cost. Essentially, it would pick up the tab for any excess expense above what you would normally pay while living in your home.

For example, let’s say that your rent is $1,500 per month and you’re temporarily forced to stay in a hotel that charges $150 per night. That’s an excess cost of about $3,000 per month, which would be covered by your loss of use coverage.

You may also face additional food, utility, and transportation expenses, which could all be reimbursed under that same coverage.

Typically there’s a maximum dollar amount that will be paid out under this coverage and a maximum time limit for payments, and your insurer will likely also set limits on what constitutes reasonable additional expenses.

Payments will end once your home is habitable, once you find a new place to live, or once you’ve hit your coverage limits.

Protection #3: Your Liability

In addition to protecting your property and making sure you can afford a place to live, renters insurance can provide a substantial amount of liability coverage.

Liability coverage protects you from the financial consequences of accidentally injuring someone or damaging their property. And your renters insurance coverage protects you both against incidents that happen in your home and against certain incidents that happen away from it.

For example, imagine that your landlord sends someone to fix your refrigerator and that person trips over your child’s walker and seriously injures himself. That could be a significant financial loss for him, both in terms of medical bills and missed work, and he would have the right to seek reimbursement from you. In that case, the liability coverage on your renters insurance policy would kick in to pay the financial damages and to pay any legal costs you might face.

As another example, maybe you’re out for a walk with your dog and he bites someone. Again, you could be financially responsible for the consequences, and your renters insurance would be there to pick up the bill.

While the odds of something like this leading to a major financial liability are likely pretty small, the potential costs could be high. And with renters insurance you can get several hundred thousand dollars of liability protection for an average of $15-$30 per month.

It’s inexpensive coverage that protects you from the risk of a big financial loss.

How to Get Renters Insurance

If you don’t have renters insurance, how can you go about getting it?

If you already have auto insurance, the easiest way to get renters insurance is through that same company. They will almost certainly provide renters insurance as well, and you may be able to get a discount for having multiple policies with the same company.

But getting renters insurance is a good opportunity to shop around. Because you may be able to get a better deal on both your renters insurance AND your auto insurance by switching insurance companies.

Here’s how to do it:

  1. Google “renters insurance STATE”, replacing STATE with your state of residence.
  2. Get a phone number for each of the major insurers providing coverage in your state.
  3. Call each insurance company directly and ask for quotes for both renters insurance and auto insurance. You should have a copy of your current auto insurance policy on hand so that you can get a quote for the same level of coverage.
  4. If you have any possessions that are particularly valuable, such as jewelry or artwork, ask how much it would cost to get additional coverage for those possessions.
  5. Make sure to ask if they offer a multi-policy discount and, if so, to get the premiums quoted with that discount applied.
  6. If there are any particular threats in your region, such as flooding or earthquakes, ask about their coverage of those specific threats.
  7. Compare the coverage and cost from each insurance company, including your current insurer. If you can get a better deal elsewhere, it should be relatively easy to switch.

Other than the work needed to shop around, getting renters insurance should be relatively quick and easy.

Are You Covered?

Renters insurance is one of those things you hope you never need but could pay off significantly if you did. In a worst-case scenario, it would help you replace all of your possessions and maintain a place to live without depleting your savings or resorting to debt.

It’s big protection at a small cost.

The post Guide to Renters Insurance: When You Need it and When You Don’t appeared first on MagnifyMoney.