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Although more households are choosing to rent their homes rather than own them, not many renters are insuring their belongings. According to an ORC International study in 2016, 95% of homeowners have homeowners insurance, but only 41% of renters have renters insurance.

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Why don’t more renters have insurance? Part of the challenge stems from confusion around the term “renters insurance.” It can be hard to understand precisely what is covered under renters insurance, so some renters avoid the concept altogether.

We’ll clear up several myths about renters insurance and outline what it covers, what it doesn’t cover and why it’s worth it. We’ll also share what you should keep in mind before deciding to purchase a renters insurance policy and how much you can expect to spend. Keep reading to learn the basics of renters insurance and the key points to understand if you’re considering buying a policy.

Renters insurance coverage myths

There are several misconceptions about renters insurance and how it can impact you. Here are three of the top renters insurance myths.

  • Myth: Renters insurance covers damage you cause to your home or apartment.
  • Reality: Just because you have a renters insurance policy doesn’t mean you can throw a wild party and allow guests to destroy your home. If you cause damage to the property, you’ll be liable for that when you move out.
  • Myth: Everything you own will be covered, with no limits.
  • Reality: While renters insurance covers your personal property in case of theft or most natural disasters, you’re limited on how much money you can get back per category. For example, if you own lots of expensive jewelry, you may find that your renters insurance policy caps the jewelry payout at an amount that is less than the value of what you own. In this case, you’ll need to purchase additional insurance to cover your collection.
  • Myth: Renters insurance covers building damage caused by a natural disaster.
  • Reality: It may seem like renters insurance should cover damage to your building caused by lightning, smoke or other natural causes. In reality, your landlord’s insurance covers this type of destruction, so you don’t have to worry about it when choosing a policy.

[ Read: Is Renters Insurance Really Necessary? ]

What does renters insurance cover?

Before you buy any insurance policy, you should have a thorough understanding of what you’re getting. Here’s an overview of what renters insurance covers:

Your personal property:

At the basic level, renters insurance should cover your personal items, including clothing, furniture, musical instruments and electronics in the case of theft, fire, vandalism or other unpredictable circumstances. When you buy renters insurance, you should complete a home inventory. To do this, list all of the belongings that need to be covered, along with their monetary value. This list is essential in claiming money back if your property is damaged or stolen.

Liability protection:

Many people associate renters insurance with the protection of their personal belongings but don’t realize that it also covers accidental damage done to someone else’s property. That’s where liability coverage comes into play — and it covers damage caused by you, your family and your pets. For instance, if your dog accidentally chews up your neighbor’s antique rug, your renters insurance policy should cover the costs. Liability protection also kicks in to cover medical bills if someone hurts themselves in your rented home.

[ Read: Renters Insurance Terms to Know ]

Additional living expenses:

If you rent a home or apartment instead of owning, you’re more vulnerable if something catastrophic happens to the property. Fortunately, renters insurance provides coverage if a natural disaster destroys your abode and you need to move elsewhere temporarily. In some renters insurance policies, you are protected against additional living expenses that you would not ordinarily need to pay, such as hotel bills, restaurant meals and other costs associated with being displaced.

What doesn’t renters insurance cover?

  • Damage caused by floods and earthquakes: Most policies don’t protect your belongings against floods or earthquakes. If you need protection for these types of events, you can purchase it separately from specialty vendors or add it to your existing policy. Add-on policies are standard in earthquake-prone areas like California.
  • Stolen cars: Even if your vehicle is stolen from your rented home or apartment, renters insurance won’t cover it. Instead, you should consult with your auto insurance representative to understand your level of coverage and what you should do if your car is stolen.
  • Damage caused by pests: Unfortunately, if you’ve fallen victim to bed bugs, rodents or other pests, your renters insurance policy likely won’t cover the damage incurred. Consult with your landlord to address these types of maintenance issues.

[ Read: The Cheapest Renters Insurance Companies ]

Things to consider before buying renters insurance

How much does renters insurance cost? In the United States, the average renters insurance policy is cost-effective, coming in at around $16 per month or $188 per year.

Work with your broker to determine how much insurance you need. As previously discussed, it’s helpful to create an inventory of your personal items and their worth to decide on your level of coverage. It will also come in handy if something is damaged or stolen.

If you’re renting a home or apartment, it’s always a good idea to have renters insurance. Not only does it protect your personal belongings, but it also provides financial coverage if you cause damage to someone else’s property or if someone is injured in your rented home.

Renters Insurance FAQ

 

Typically, yes. After you pay the deductible, your renters insurance will cover the cost of your belongings if they’re stolen. This is when it’s important to have a pretty accurate record of your belongings and their values, so you know what you can claim in case of an issue. Some renters insurance will also cover any belongings stolen from your car, as they are still your property.

If you have high-value items that you’re concerned about, you may need additional insurance for “scheduled” items to cover that value, as your standard insurance may not cover that much.

 

Your renters insurance policy covers whomever is listed on it. If you and your roommate both want coverage, you’ll need to both have a policy in your name or a shared policy. Your policy in your own name will not cover your roommate’s belongings. It’s a good idea for everyone in a living space to have their own renters insurance, that way if there’s an issue that affects the whole apartment, you’ll all be covered.

 

What’s nice about renters insurance is that it does cover more than just your home. Like we previously said, your renters insurance can even cover you if your belongings are stolen from your car. Renters insurance can also cover your storage unit should something get stolen from there or damaged.

It;s a good idea to familiarize yourself with your policy as belongings in a storage unit generally aren’t fully covered — it’s usually 10% of your coverage amount. So if you have coverage up to $50,000, you can only allot $5,000 to your storage unit belongings.

If you’re using a storage unit that’s independently owned (not part of your apartment), you can potentially get insurance through them to supplement your own renters insurance if you’re concerned. Check with the storage facilities to see what they offer.

 

When it comes to natural disasters, a standard insurance policy may not be very helpful. Typically they cover the lesser disasters like wind, rain, lightning and hail. Hurricanes, earthquakes, and floods are not generally covered by a standard insurance policy, which means if you live in an area prone to these natural disasters, you’ll want to look into an add-on.

Residents of California should add on earthquake coverage, just like residents of the Southeast United States might appreciate hurricane insurance. These will cost extra on your policy but will provide peace of mind — and assistance — should you experience damage from these disasters.

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