Yes, You Need Renters Insurance Even if Your Place Is Small and Inexpensive

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It doesn’t really matter how small your apartment is or how fancy your kitchen chairs are—everyone should invest in renters insurance, because the ROI is pretty priceless: protection and peace of mind. It’s okay if you don’t know where to start (few people do). We’re breaking down the who, what, why, and how of rental insurance, from coverage options to costs and everything in between.

What Is Renters Insurance?

Simply put, renters insurance (sometimes called tenant insurance) is an insurance policy you pay for to help cover you and your belongings in the event of an incident, including anything from fire to theft. Usually your landlord’s insurance will cover repairs to the property itself—say, if there’s a leaking ceiling—but will not protect your own belongings (the TV and rug that were damaged because of the leak) or the cost of having to live elsewhere if you need to move out during repairs. (Legally, landlords are only responsible to their tenants if they were aware of unsafe conditions and didn’t repair them within a reasonable time frame.).

What Does Renters Insurance Cover?

A renters insurance policy helps protect you and your stuff from a wide range of possibly damaging scenarios. And remember, not every event for which you’d potentially need coverage is an obvious catastrophe. Yes, the big ones include theft, fire and water damage, but unexpected incidents—like your dog uncharacteristically biting a visitor or your child accidentally throwing a baseball and breaking your neighbor’s window—can happen too. In these cases, renters insurance will soften the blow of any charges you might be held responsible for.

There are typically three types of coverage included in a renters insurance policy. Personal property coverage will pay the cost to repair or replace any damaged or stolen clothing, furniture, valuables, electronics, and so on. Renters liability insurance helps you pay for repairs if you accidentally damage someone else’s property, or if someone gets injured at your place and blames you. Finally, on the off chance you’d ever have to vacate your apartment for serious repairs, renters insurance can help cover additional living expenses you wouldn’t normally have had to pay for, like a hotel room, transportation, storage space, or increased food and beverage expenses.

RELATED: Is Liability-Only Auto Insurance Right for You?

Something to note: Some policies will pay for what is costs to replace lost or damaged items (aka replacement cost coverage), while others will only pay as much as the original market value of those items (aka cash value)—even if the item has increased in value by the time it’s ruined and the price to replace it has gone up. While it’s often more expensive to pay for replacement cost coverage, it could end up covering your possessions at a higher amount down the line.

What Won’t Standard Renters Insurance Cover?

Many policies specify they won’t cover losses from natural disasters like earthquakes, tornadoes floods, or hurricanes—especially if you live in an area prone to them. If you have water damage from above, (the upstairs neighbor’s kitchen sink pipe bursts and overflows into your unit), you’ll be covered; however, if the water damage comes from the ground level, like storm surge or ground flooding, and has nothing to do with the integrity of the building, you might not be not covered by standard renters insurance. For additional flood coverage, consider purchasing flood insurance (you can do at FloodSmart.gov).

Another time to consider opting for addition coverage or a special policy rider is if you work from a home office. Most policies don’t offer much coverage for business equipment—the upper limit for home business equipment is often around $2,500. So if you have expensive computers, scanners, or other devices in your home office, or keep inventory lying around at home, it’s smart to add a supplemental policy rider.

Do you have a ton of cash at your place? Unfortunately if you get robbed, most renters insurance policies will only cover a small portion of whatever’s taken. Sometimes the maximum insurance limit is as low as $250, while some policies generally won’t cover more than $500.

Extra coverage might be order too for high-value property. Do you have a diamond engagement ring or priceless watch from your grandparents? Get a rider or floater on your current insurance policy to cover it. Same goes for other expensive jewelry (usually over $1,000) and valuable artwork, for which you might even need an additional policy rather than just a policy add-on.

How Much Is Renters Insurance?

We know what you’re thinking: Another monthly expense to deal with? But this will be money well spent, guaranteed. What you pay for rental insurance coverage depends on what you’re willing to pay and the type of coverage plan you go with. (And remember, the higher your deductible, the lower your premium, and vice versa.) It’s smart to take inventory of your stuff to see how much personal property coverage you should pay for. In other words: About how much would it cost to repair or replace everything you own?

According to the National Association of Insurance Commissioners, the average renters insurance policy costs between $15 and $30 per month (or between $180 and $360 per year). Worried that’s too much on top of everything else? Imagine how much more expensive it would be to replace all your stuff after an accident without it. Think about it: You’re not just paying for your stuff, you’re paying for peace of mind.

How to Get Renters Insurance

It’s much easier than you think—in fact, you’ll wonder why you haven’t already done it. After you’ve taken stock of your belongings—from coats to computers—figure out what your landlord’s insurance covers, research different types of insurance policies, and compare insurance companies before taking the plunge. Many companies let you apply for a free quote online, in person, or over the phone, and will talk you through the best coverage plan for your situation. Industry newcomer Lemonade, for example, offers lightening-fast sign-up, an easy-to-navigate app, and good basic coverage. Larger veteran insurance companies like Nationwide are great for extended plans, covering earthquake damage, antiques, jewelry, or things stolen from inside your car or boat.

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Dave Gordon

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