Do You Need Renters Insurance?

When you own a home, your homeowners insurance covers everything inside, including your computers, phones, jewelry, and furniture. But what if you're renting? Renters insurance is an inexpensive way to protect your belongings and ensure that you will have a place to live if your apartment is damaged by fire or weather.

Prior to purchasing my home, I lived in ten apartments in four different cities, and I never had renters insurance.

I told myself that my apartment was unlikely to catch fire or be destroyed in a windstorm. And even if that did happen, I figured I didn't really own anything of value in the first place. I convinced myself that the money I spent on renters insurance, which was usually between $15 and $30 per month, could be better spent elsewhere.

Does this sound familiar? Let me tell you a story that changed my mind and, hopefully, will change yours as well.

My friend lost everything he owned last year when his apartment caught fire. He, like 69% of renters, was not covered by renters insurance. Despite the fact that a bar organized a benefit for him, he is still unable to replace everything he has lost. “People aren't aware of how quickly it adds up. “Every sock, spoon, fork, sheet, pillow, and piece of furniture must be replaced,” says Greg Isaacs, president of Coverhound, an online insurance carrier.

Still not convinced that renters insurance is worthwhile? Here are some more reasons to buy a policy.

1. If your rental becomes uninhabitable, your insurance company will put you up in a hotel.

I always assumed that if a fire, storm, or other natural disaster rendered an apartment unlivable, the landlord would be legally obligated to put me up in a hotel. Greg claims that this is not the case.

“The landlord is only liable for not charging the tenants rent,” he claims. “However, renters insurance will cover the cost of putting you up in a hotel or an extended-stay facility.”

2. The right renters insurance policy could provide you with brand new items.

Hopefully, the fact that renter's insurance will protect you from homelessness (or worse, moving back in with your parents) will be enough to persuade you to purchase one.

When filling out the forms, make sure to select replacement-cost coverage rather than actual cash value. “Actual cash value means that if you have a six-year-old cough and something happens to it, the insurance company will pay you the value of a six-year-old couch,” Greg explains. “If you have replacement-cost coverage, you will be reimbursed for the cost of a new couch.”

Replacement-cost coverage will increase your yearly premium by $20 to $50, but it is well worth it. “If something goes wrong, you'll get thousands of dollars back instead of hundreds.”

Lemonade is another option to consider when selecting your renter's insurance policy; they offer very low rates and have also been very good about making payments when claims are made.

3. It may help you save your tookus if you get into trouble on Twitter.

Policies that cover personal injuries sustained on your property may come in handy if you engage in online slander.

“If you make a negative statement about someone online and they sue you for libel or slander and win, your renters insurance may cover the judgement,” Greg says.

Before paying out, the insurance company will look into several issues, such as whether you made the remarks on purpose or not.

4. It may be required by your landlord.

Landlords are increasingly requiring tenants to obtain renters insurance before signing a lease. “Landlords are only concerned with liability and your guests being injured on the property,” Greg explains.

However, liability safeguards the landlord's interests. Not your hobbies or your possessions. “A landlord may require a policy with $100,000 in liability coverage,” Greg explains. “That won't help you if the place becomes uninhabitable or you lose your belongings.”

You cannot save money if you share a policy with your roommates. “It's difficult to find a carrier who will co-insure people who aren't married or have children,” Greg says. “The policy only covers the property of the person who purchases it.”

Have you purchased renter's insurance? If so, why or why not?