5 biggest renters insurance mistakes - and how to avoid them
Tamara E. Holmes
While many people see the value of home and auto insurance, renters often don't see the value of renters insurance.
According to a Jan. 2015 survey commissioned by insuranceQuotes.com, 60 percent of renters don't have renters insurance.
However, many of the reasons renters say they don't need coverage are misunderstandings that could ultimately cost them thousands.
Mistake 1: The building owner's insurance will cover you.
According to the survey, conducted by Princeton Survey Research Associates International, 43 percent of respondents said one reason they didn't have renters insurance is because their landlord already has it.
While that's likely true, a landlord's insurance will only cover damage to the building's structure, such as the walls, the ceiling or the plumbing.
Your landlord's insurance will also pay for the costs associated with repairing or rebuilding if your home is damaged in a disaster such as a fire or hurricane.
However, you'll need a renters insurance policy to cover your belongings if they're destroyed, damaged or stolen. If your apartment or rental home is uninhabitable after a disaster, a renters insurance policy will also pay for temporary living expenses while your landlord makes repairs.
Mistake 2: Renters insurance costs too much.
Forty-five percent of survey respondents said they don't have renters insurance because it costs too much. When asked how much they thought it cost per year, 18 percent said between $500 and $750, 10 percent said between $750 and $1,000, and 22 percent said $1,000 or more.
In reality, "the average cost of renters insurance is between $200 and $300 per year," says Loretta Worters, vice president of the Insurance Information Institute III).
That breaks down to about $16 to $25 per month -- or what you might spend at Starbucks in a week.
Those who think they can't afford it may need it the most, says Lolita Scesnaviciute Guarin, author of "Be Insurance Savvy".
"If your apartment burns down and you don't have insurance, you might not have the savings to replace your flat-screen TV," she says.
You may also qualify for a multipolicy discount -- also known as bundling - if you buy your renters insurance and auto insurance from the same company, Guarin adds.
Mistake 3: A rental home with good security doesn't need insurance.
Fifty-nine percent of survey respondents said they didn't have renters insurance because their apartment or rental home has good security.
However, even the most secure neighborhoods sometimes experience burglaries, and crime isn't the only risk that renters insurance covers.
By purchasing renters insurance, your possessions are covered against losses from fire, smoke, lightning, vandalism, explosion, windstorm and water damage, Worters says.
However, be aware that renters insurance doesn't cover flood damage, which you would need a separate policy for.
Mistake 4: Only people with valuable possessions need renters insurance.
Forty-two percent of survey respondents said they didn't have renters insurance because they didn't have enough property to insure.
It's easy to think your possessions aren't worth much, but if you had to replace everything at once, the costs would add up quickly.
"You can go buy a few simple things in Walmart and end up spending a few thousand dollars," Guarin says.
A renters insurance policy won't only cover your possessions inside the home, but it will also cover your possessions when you're on the go.
For example, if your laptop is stolen from your car, you would have coverage.
Maintain a home inventory in which you list all of your possessions, from your furniture to your pairs of shoes. That way, if your possessions are damaged, you'll easily know what needs to be replaced.
When it comes to covering your possessions, it's also important to understand how much your renters insurance policy will actually pay, Worters says.
If your policy covers the actual cash value of your belongings, it will pay for what your valuables are worth minus depreciation. On the other hand, a replacement cost policy pays the cost of replacing your possessions even if the cost has risen due to inflation.
If you have extremely valuable possessions such as jewelry or antiques, your policy may not cover the entire replacement cost. In that case, consider buying a floater, an addition to an insurance policy that provides additional coverage.
Mistake 5: Renters have fewer liabilities than homeowners.
Renting may come with fewer responsibilities than homeownership, such as the freedom from worrying about repairs. However, when it comes to certain liabilities, such as if someone gets injured inside the home, renters aren't let off the hook so easy.
For example, if you throw a party and a guest falls down the stairs and injures himself, he can sue you, Guarin says.
You can also be found liable if you have a pet and it bites someone inside or outside of your home.
Like homeowners insurance, renters insurance covers your responsibility to other people injured at your home, paying the person's medical bills or your legal defense costs if they sue you. Most renters insurance policies provide a minimum of $100,000 in liability coverage, the III says.As with most insurance policies, the best-case scenario is to not have to file a claim. However, if you're a renter and disaster strikes, a renters insurance policy can give you the protection you need.
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