Lloyd Companies Logo

Renters Insurance: The Rundown

Renters Insurance is a form of property insurance that provides coverage for the policy holder’s belongings as well as liability within a rental property. More simply, it protects your stuff and has your back if you break your neighbor’s stuff. If you’re a renter, you’ve probably been told a time or two that you should purchase Renters Insurance. If you’ve yet to heed this advice, you more than likely justified your decision with one of the following misconceptions about the all-important protection: 

  • It’s too expensive.
  • My landlord has insurance, so I’m covered.
  • My stuff isn’t worth enough to insure.
As a company in the business of renting apartments, we hear these arguments all the time. Unfortunately, such responses reveal a misunderstanding of what Renters Insurance is and does. 

We’ve addressed the above myths below in an effort to help you fully understand the costs and benefits of purchasing Renters Insurance. We’ve also included some tips about how to go about selecting and purchasing a policy that’s right for you.

1. It’s too expensive.
Renters Insurance is cheap. Averages suggest you’ll pay between $8 and $15 a month depending on the type of coverage you need. For roughly the price of your Netflix subscription or an evening dining out, you can protect everything you own from fire, theft, natural disasters and all sorts of other unforeseen circumstances. Nobody expects the unexpected. 

2. My landlord has insurance, so I’m covered.
Unfortunately, this simply is not true. Your landlord’s insurance only covers the building and the property on which it sits. It’s not that your landlord doesn’t want to insure your belongings, he or she can’t. In order to secure insurance, a person must have what is called an insurable interest.  Insurable interest exists when a person or entity could potentially suffer a financial loss. Since you purchased your stuff, if it were to be stolen, you would incur the loss, not your landlord.

3. My stuff isn’t worth enough to insure.
If you’re a first-time renter living in a furnished apartment that you’ve yet to outfit with belongings, you may not need Renters Insurance. Regardless of your situation, though, it would be wise to take inventory of your apartment before making a decision. The big-ticket items alone might be worth insuring, and when you begin to total all of your smaller possessions, you might be surprised at how quickly the costs add up.  Along with evaluating the cost of your belongings, you may want to consider what your belongings are worth to you on a personal level. While some of your belongings might not be worth much monetarily, you might consider them irreplaceable. 

Also, even though you may not consider your belongings worth insuring, Renters Insurance covers any damage that you might cause to your neighbors’ belongings. If your bathtub overflows and floods neighboring apartments, or if you’re culinarily challenged and start your Thanksgiving turkey on fire, having Renters Insurance protects you from being held liable for any damages for which you would otherwise be held responsible.  

Helpful Tips
Renters Insurance coverage should be tailored to each individual. Every policy will vary based on age, location and specific needs. If you own and insure a car, calling the agency that covers your vehicle is a great place to start. Many companies will bundle policies together offering customers discounts for their loyalty. Plus, receiving a single bill for all of your insurance coverage is more convenient then having to manage multiple payments and multiple deadlines to multiple carriers. 

As you begin your shopping experience, you should be aware of the two types of Renters Insurance policies: cash value and replacement cost policies.

Cash value policies will pay you for what your belongings are worth today. So, if you purchased a laptop for $1,000 three years ago, this policy may only pay you $650 (or whatever it’s worth) due to depreciation.

Replacement cost policies pay out whatever it would cost for a given item to be replaced today. In this case, your policy would pay you enough to replace your $1,000 computer today without considering its age and depreciation.

Because the payouts are calculated differently, the premiums for these two types of insurance will be different as well. Replacement cost policies will always have a higher premium than cash value policies. It’s your job as a consumer to decide how much more you’re willing to pay for a policy that allows you to immediately replace your belongings versus being reimbursed for what they’re currently worth. If the price difference is minimal, it’s in your best interest to go with the replacement cost policy.

When you’re ready to purchase Renters Insurance, begin by estimating the value of all of your possessions. If you run stuck or aren’t sure what your stuff is worth, many insurance companies have helpful tools to guide you through the process.