Tip for New Renters – Get Insurance!

Tip for New Renters – Get Insurance

As you move into your first apartment you will have a lot of issues to consider: where to put the couch, where to get a couch, whether you should shell out for cable TV, and how and where to find food. If you are a new college grad, you might also be considering your finances now that it’s time to start paying back those student loans. What you might not be considering is where and how to get renter’s insurance.

What is Renter’s Insurance?

Renter’s insurance is similar to homeowner’s insurance, except it protects a renter’s personal possessions. It’s not a requirement in most states, but some landlords might require renters to have it as a condition of their lease. Even if your landlord doesn’t require it, it’s a good idea to have it.

Why You Need Renter’s Insurance.

The main reason that you need renters insurance is because your landlord’s insurance will not cover your own assets. If the guy in the apartment above you leaves his bathtub running while he’s at work all day, your landlord’s insurance will cover the water damage to your ceiling, but it won’t cover the water damage to your entertainment center. The same goes if there’s a fire, a tornado, or if the guy upstairs drops a bowling ball through your ceiling onto your collection of Steuben figurines.

On the other hand, renter’s insurance will cover all of that and more.

What Does Renter’s Insurance Cover?

As we said before, renter’s insurance covers your stuff.  Anything that you own in your apartment is protected from “acts of God” like fires and severe weather, as well as theft. However, renter’s insurance will not cover things like normal wear and tear, and damage from negligence – like trying to use your computer as an anvil.

Renter’s insurance can also protect you from liability if someone is injured at your apartment, such as someone slipping in your shower. That means, even if you think your stuff isn’t that valuable, you will still have coverage against injury and accident claims, which can be quite expensive.

Each policy is different, however, and you can pick and choose what type of coverage you want.

Picking Coverage

The first thing you should determine is how much coverage you need for your stuff – the coverage is essentially the maximum dollar amount that the policy will pay for a claim. Perform an inventory of everything you own and estimate how much it would cost you to replace everything. On the surface it might seem tempting to pick the highest available coverage, but that will also increase the cost of your monthly premiums. If you get most of your stuff from thrift stores, there’s no point in having a large policy. However, if you have a lot of expensive furniture and designer clothes, you could come up short if you don’t pick enough coverage. This is why it’s important to do a basic inventory of what you have now, estimate how much more you might acquire within the year, and how much it will cost to replace it, and then pick the amount of coverage that’s closest to that number.

The next thing you should determine is how much you want to pay in a deductible. The deductible is the amount that you have to pay out-of-pocket before your insurance covers the rest. The amount of the deductible inversely affects your monthly premium, and a higher deductible usually means a lower premium. However, if the deductible is too high, then you might not be able to pay it if you ever need to make a claim. There’s no point in having insurance if you can’t afford to make a claim when you need to. Ask yourself how much money you could come up with within a week if the guy upstairs burns the place down, and pick the deductible that is closest to that number. If that deductible makes your premium too expensive, pick the premium that you can afford, and consider setting the difference aside each month to help cover the deductible if you ever have a claim.

The last thing you should do is determine if you need any additional coverage. For example, most standard policies will cover your electronics if they damaged in a fire, or stolen from your home, but they might not cover damage from lightning strikes and power surges. Some policies offer additional electronics coverage for just that. Depending on the provider, they could also offer things like flood coverage, coverage for alternate housing if you are not able to return to your place, and floating coverage for really expensive and high-end items, like antiques. Choose your additional coverage wisely because each option can raise the cost of your monthly premiums. However, you also want to make sure you’re covered if something goes wrong.

Check out these other great MoneyAhoy posts:

What Kind of Car Insurance Coverage Do I Need? Understanding the Differences Between Homeowners’ and Landlords’ Insurance How to Choose a Life Insurance Plan Life Insurance and Short Term Disability Insurance – Recap