4 Things Renters Should Know About Renters Insurance

June 1, 2016 | By

For homeowners, having a homeowners insurance policy isn’t mandatory, per se, although lenders typically require that they get one if there is a mortgage on the property. That hasn’t scared homeowners away from getting a policy. Last year, 95 percent of homeowners in the country had homeowners insurance, according to a 2015 poll conducted by the Insurance Information Institute (III).

But for those who rent a home (or apartment), having renters insurance wasn’t nearly as prevalent—only 40 percent of renters said they had the coverage, according to the III.

There are misconceptions about renters insurance. Renters may not think they have a sufficient number of possessions to justify getting insurance. They may think that their landlord will cover damages. They may fear that the policy itself is too expensive.

Not so, says Kate Williams, director of research for Consumer Affairs, a consumer news and advocacy organization. If anything, says Williams, renters insurance protects renters from costs incurred from property damages, provides liability protection, covers additional living expenses, and provides peace of mind—all at affordable rates.

“Renters think that the landlord covers [damage to personal property], but what the landlord’s insurance covers is just the building,” says Williams, adding, “but your actual stuff isn’t covered.”

“That’s one of the main things [renters] insurance covers,” says Williams. “It’s worth the money.”

Here are four things renters should keep in mind when shopping for a renters insurance policy:

1. Liability

In the event there’s an accident at a renter’s home or apartment—like an overzealous dog that scratches a houseguest or a friend who takes a tumble down a flight of stairs—a liability policy may cover any medical expenses and property damage incurred by the incident.

“It can help with potential lawsuits that can result from somebody getting injured on your property,” says Williams. The typical renters insurance policy offers $100,000 in liability coverage, but renters can adjust that amount depending on their personal finances.

2. Replacement Cost vs. Actual Cash Coverage

The III advises renters purchase enough insurance to replace all personal possessions in covered incidents such as burglary and fire. Creating a home inventory will help renters estimate the value of all their belongings.

While replacement-cost coverage can cost a bit more than actual cash value coverage, it can be worth it, says Wilson.

“Let’s say you have a $1,000 television you bought a couple of years ago and today it’s only worth $300. If you get replacement-cost coverage, then you would get the $1,000 for a new TV,” says Williams. Actual cash value coverage only covers the depreciated amount of that TV.

To create a home inventory, visit the III’s www.knowyourstuff.org.

3. Shop Around

When shopping for a policy, renters should remember, “not one size fits all,” says Williams.

She advises renters to compare the policies offered by three or four separate insurance companies by looking at customer reviews. They should also see how fast the insurer processes claims.

“You can get cheaper insurance, but if it takes six months to get your claims processed then it might be worth spending an extra couple of dollars,” says Williams. Ideally, claims should be processed anywhere between a few weeks to a month, she adds.

While some customers may opt for online insurance companies like GEICO and Progressive, others prefer in-person customer service at an actual brick-and-mortar storefront,” says Williams.

4. Lowering Your Risk Factors (and Cost)

Many insurers will reduce your premiums if you have fire or burglar alarms, fire extinguishers, sprinkler systems, and/or deadbolts on exterior doors. Some companies might also offer discounts if you have more than one policy with them. Be sure to ask about any discount you might be entitled to, advises the National Association of Insurance Commissioners.

At the end of the day, Williams says, the monthly cost for renters insurance is “not that expensive.”

In 2013, the III estimated the average cost of renters insurance was $188 a year.

It’s worth the expense, says Williams. “[Just] look for a company that is going to take care of you, especially with claims processing and customer service,” she adds.

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