Many people who rent are under the misconception that they do not need the same protection as a homeowner. In reality, renters need many of the same protections found on standard homeowners insurance policies.
Both homeowners and renters insurance provide policyholders with financial protection against property damage, medical payments, liability costs, and other expenses that may result due to a covered incident.
The primary difference between the two is that homeowners insurance includes dwelling coverage, where renters policies do not. In most other ways, they are one and the same.
More U.S. households currently rent than at any time since 1965, according to an analysis by the Pew Research Center. However, a study by ORC International found that although 95 percent of homeowners carry a home insurance policy, just 41 percent of renters have a renters policy.
A landlord’s property insurance policy only covers losses to the building itself, as well as certain liabilities. That means that any loss or damage to a renter’s personal belongings is generally not covered.
Before selecting a renters insurance policy, you should understand how it works and what it covers.
How Renters Insurance Works
Renters insurance is designed for people who rent an apartment, townhouse, condo, house, or attached dwelling. This type of policy protects against the loss of personal belongings, temporary relocation if a rental property becomes uninhabitable due to a covered event, and certain types of liability.
Unexpected incidents can occur on a rental property just the same as they can on a homeowner’s property. Although the landlord is generally responsible for any damage to a structure caused by covered perils like storms, a landlord’s insurance does not usually cover renters. A renters insurance policy will not cover the structure in which the tenant lives. Instead, it covers the renter’s interests.
What Renters Insurance Covers
Renters insurance provides three main types of coverage: personal property coverage, personal liability coverage, and loss-of-use coverage. Choosing a policy that offers comprehensive protection can ensure that renters are protected from a wide range of perils.
Personal Property Coverage
A renters insurance policy covers personal belongings in and around a home, such as furniture, computer equipment, electronics, appliances, clothing, and jewelry. If personal possessions are damaged, destroyed, stolen, or lost, a basic renters insurance policy will reimburse the policyholder for the loss of property up to their coverage limit.
Renters insurance provides coverage for a variety of perils. Some of the most common perils found on renters policies include fire, lightning, explosions, hail, windstorms, smoke damage, theft, vandalism, falling objects, and damage by aircraft or a third-party vehicle.
Other common perils include riots, volcanic eruption, the weight of ice, snow or sleet, overflow or leakage of water, damage from steam heating, short circuit damage due to electrical appliances, or the freezing of air conditioning, plumbing, or heating systems.
Many renters policies also cover property that is damaged, stolen, or destroyed while it is not in the policyholder’s home. For example, if a policyholder’s laptop was stolen while on vacation, it may still be covered even though the theft occurred outside of the covered dwelling.
Personal Liability Coverage
If someone is injured while in a rental property, the tenant may be found fully or partially responsible. For example, renters insurance would provide coverage if the tenant’s dog bites a visitor or a guest suffers a slip and fall accident in the home that requires medical assistance. Renters insurance typically includes personal liability and medical coverage that will help cover medical expenses.
If a person decides to sue a tenant for injuries caused in their home or apartment, liability coverage also may pay for any legal expenses, including defense costs, settlements, and judgments.
A renters insurance policy may be useful in other scenarios as well. If a tenant accidentally leaves the bathroom faucet on and it floods the apartment below, the insurance company should pay for damages to the property. Renters policies often cover property damage to others that a tenant may be held liable for if found at fault.
Loss-of-Use Coverage
On occasion, a rental property is deemed uninhabitable and the tenants are required to move. Renters insurance may offset the cost of a temporary place to live while the tenant looks for a new apartment or the damaged apartment is repaired.
A renters policy may compensate the policyholder for hotel rooms, the cost of food if it exceeds the usual food bill, and similar expenses. Loss-of-use coverage is also known as additional living expenses coverage.
Other Renters Insurance Coverages
While every policy is unique, renters insurance also may provide other types of coverages. Some of these coverage options include:
Items Stored Outside the Home
Renters insurance does not only cover personal belongings inside an apartment or house, but it may also cover items stored outside the home, such as in a vehicle or storage facility.
Food Coverage
If a tenant’s refrigerator or freezer stops working, hundreds of dollars in groceries may be lost. Some renters insurance policies offer food coverage that reimburses the tenant for food lost due to a covered peril, such as a power outage.
Debris Removal
A renters insurance policy may include the cost of removing debris after a covered loss has occurred.
Third-Party Property
If a friend allows a renter to borrow their property and it becomes damaged, renters insurance may fund the cost to repair or replace the third party’s belongings.
Forgery Coverage
If a theft occurs and a tenant’s credit card or checkbook is stolen and used illegally, renters insurance may cover any financial losses that occur due to the incident.
What Renters Insurance Does Not Cover
Although renters insurance is fairly comprehensive, it does have its limitations. Here are some of the most common coverage exclusions found on standard renters insurance policies:
Car Damage or Theft
If a tenant owns a vehicle and it becomes damaged or stolen, renters insurance may not provide protection. Instead, the tenant should acquire a car insurance policy with comprehensive coverage. However, renters insurance may cover personal belongings in the car at the time of the damage or theft.
Bed Bugs and Other Pests
Renters insurance policies do not generally cover damage caused by bed bugs or other types of insects that may reside in the home or apartment. This is considered a maintenance issue and the tenant or landlord may be held responsible for damages depending on the circumstances.
Roommate Property
Renters insurance may not reimburse for damage or theft to a roommate’s personal possessions. To be covered, the roommate will need to acquire his or her own policy or ask to be listed on the tenant’s existing policy.
Flood Damage and Earthquakes
Standard renters insurance policies do not protect against flood or earthquake damage losses. However, these perils can usually be added to an existing policy for an additional fee.
Renters Insurance Claims and Payouts
In addition to knowing what renters insurance covers, it is also important to understand the claims and payout processes. Renters insurance claims may be paid out differently based on the type of policy, such as actual cash value or replacement cost.
Renters policies that pay out the actual cash value will pay the policyholder what the damaged or stolen item is worth today. For example, if a two-year-old computer is stolen, the insurance company would pay out what the computer is worth today, not what it was worth two years ago when initially purchased.
Insurance policies that pay out the replacement cost will pay the policyholder the cost of replacing or repairing the damaged or stolen item. This type of policy does not factor in depreciation.
With replacement cost coverage, the insurance company would give the policyholder a check to replace the laptop. The cost of a replacement cost policy is typically more than an actual cash value policy as the insurance company typically pays out more for a claim.
To file a renters insurance claim, notify the police and/or landlord if items have been stolen from the apartment or home. Write down any important information that the insurance company may request, such as the policy number, inventory of the damaged or stolen items, photos of the damage, and a police report and witness statements, if available. Ideally, the policyholder should contact their insurance company within 24 to 72 hours to file a claim.
Shopping for a Renters Insurance Policy
There are many considerations when shopping for a renters insurance policy. The policy should provide ample coverage based on the policyholder’s level of risk. Although price is also an important factor, the final decision should not be based on cost alone. Take into consideration all aspects of the policy, such as coverage limits, deductibles, and the ability to add additional coverage if needed.
Tenants that want to save money should consider bundling their renters insurance policy with other policies they may already have. Many insurance companies allow renters insurance to be grouped with other common policies, such as car insurance. Bundling these two coverages can save policyholders up to 10 to 20 percent of their insurance expenses.
Speak With An Experienced Insurance Broker
Renters insurance offers affordable coverage to anyone that rents a house, townhome, condo, or apartment. However, not all policies offer the same coverage options and limits so it is important to consult with an experienced insurance broker to ensure that the policy fits the renter’s unique needs and budget. For more information about renters insurance or to request a quote for a renters policy, contact our Georgia renters insurance brokers at Southern States Insurance today.