For property owners, home insurance is a no-brainer. But, unless it’s a stipulation of the lease, there’s usually no requirement for renters to hold insurance. So, why spend money when you don’t have to? Well, renter’s insurance is a great way to protect your belongings and your liability. But what’s the difference between renter’s and homeowner’s insurance? And what’s included in the coverage?
Your landlord’s insurance is a type of homeowner’s insurance. Among other coverages, this policy protects the physical building; and, some policies may cover the landlord’s personal property that’s left in the unit for your use, such as fridges and washing machines.
Protection for Personal Property
If your unit experiences smoke damage from a fire, your landlord’s policy will respond to covered losses. However, many renters aren’t aware that their landlord’s coverage doesn’t extend to their personal property. So, in this case, you’d be responsible for the cost of replacing your damaged belongings. While this risk may seem marginal, most people are surprised to learn the total value of their possessions. In fact, the average renter’s policy provides $30,000 of coverage for personal property. (To find out how much your stuff is worth, here’s a guide on how to conduct a home inventory.)
What You’re Protected Against with Renters Insurance
The alternative to self-insuring is to purchase a renter’s insurance policy. Most policies protect against a range of perils including fire, theft, sewer back-up, and burst pipes. Renter’s insurance also protects your personal and premises liability. Personal liability relates to accidental harm caused by you to another person (or their property) anywhere in the world. So, if you hit someone with your golf ball on holiday in Jamaica, this coverage would respond if they decide to sue you. Premises liability relates to the same risks as they occur at your home. In the example above, your landlord’s insurance provider may take legal action against you to recover the costs of repairing the smoke damage. With renter’s insurance, personal liability will likely respond to this type of covered claim.
Some renter’s insurance policies also provide coverage for additional living expenses (ALE). So, if you’re forced to move out while contractors repair the smoke damage, ALE would reimburse you for those costs you incur above and beyond your normal cost of living, up to your specified limit of insurance. Often, ALE is used to cover the cost of staying at a hotel or eating at restaurants.
Customize Your Coverage
When getting a quote, it’s important to consider the quality of your coverage, not just the price. Some insurance providers, like Square One, allow you to customize your personal property coverage, so you only pay to insure the things you actually own. Square One also allows you to personalize your limits and your deductible (the portion of a loss that you’re responsible for). As a general rule, increasing your deductible will reduce your monthly premium.
Renters Insurance Considerations
As with any insurance policy, coverage depends on the cause of loss, some of which are commonly excluded from renter’s insurance policies. For example, damage caused by flood or earthquake is usually excluded.
Also, depending on the policy, coverage often will not include your roommate. So, check with your provider, as you may require separate policies. Luckily, renter’s insurance is usually inexpensive. Renter’s insurance may also help you to secure a lease, as it demonstrates to your landlord that you’re a responsible tenant.
Finally, renter’s insurance allows you to build a history of claims-free coverage. If you switch to a homeowner’s policy at a later date, any loyalty-based discounts you’ve earned will help to offset the initial cost of your renter’s insurance.
About the Author: Stefan Tirschler, Product + Underwriting Manager, Square One Insurance Services
Currently, Stefan is a Product + Underwriting Manager at Square One Insurance Services.
With over 8 years of insurance industry experience, Stefan has an extensive background in financial risk & risk advisory, due diligence, and relationship management. Holding one of the most sought-after designations in the industry, Stefan is a Fellow Chartered Insurance Professional that strives to educate consumers and professionals alike within home insurance.
About Square One
Square One Insurance Services is an insurance agency specializing in a wide variety of home insurance products and services. Eliminating all unnecessary complexities built into traditional policies, Square One makes it easy and convenient for people to personalize their insurance to meet their exact needs.