What is renters insurance?
Renters insurance is a home insurance policy that protects tenants and their property. Renters insurance covers your personal property when you are living in a rental house or apartment. It also provides liability coverage. Renters insurance exists to protect you because your landlord's policy doesn't.
How does renters insurance work?
Like a home insurance policy, renters insurance works by setting a coverage amount to protect your personal property. There are a list of covered perils included in the policy, and it will pay out to replace or repair your items if they're damaged by any covered peril.
Renters insurance covers:
- Your personal property. This coverage extends anywhere in the world, with some limitations.
- Personal liability. This protects you when you're held liable for injuries or damage to someone else.
- Loss of use. Also called additional living expenses, this pays for additional living costs if you have to move out due to a covered loss.
Renters insurance usually works on an actual cash value basis, which means it will pay out the depreciated value of your items rather than what they would cost new. However, you can upgrade your renters insurance policy to cover replacement cost; you'll pay a little more in premiums but get a lot more coverage.
Renters insurance also provides liability coverage, which will pay damages if you cause injury or property damage to someone else. It also pays for you to live elsewhere, like a hotel, if a covered loss makes your home uninhabitable during repairs.
Do I need renters insurance?
Unless you can pay to replace all of your personal property out of pocket, you need renters insurance. While you may not think you have a lot to replace, consider everything you own, from your towels to your TV, and then consider what you would do if the home you're renting burned to the ground.
How does a renters insurance claim work?
Renters insurance reimburses you for damaged or stolen personal property. You have to file a claim with the renters insurance company, including information about the covered loss.
Here’s how to file a renters insurance claim:
- Notify police and file a police report, if necessary. This applies to a theft, vandalism or other claim involving a crime.
- Notify your landlord. The landlord may need to file a separate claim with their insurance if there’s structural damage.
- Take photos or videos of the damage. Make a list of stolen or damaged possessions. Don’t throw away damaged items until the renters insurance company tells you to discard them.
- Contact your renters insurance company. Don’t wait to notify the insurer. Renters insurance policies may only give you two or three days to report a loss.
- Fill out the claims form with the applicable information. The insurance company will review and contact you about the process. A claims process can take hours to days depending on the severity of the claim.
- Work with your adjuster. The adjuster will assess the claim and determine what's covered, and then provide you with a settlement. Cooperating with the adjuster will make things move more smoothly.
Filing a claim may increase your renters insurance rates. Insurance companies base rates on risk. If you've filed a claim, an insurer may view you as a bigger risk. Hence, the higher renters policy rates.
Before filling an insurance policy claim, think about how much the company may reimburse you for the loss and whether it's worth it to file the claim. If a thief stole a 20-year-old TV and you have actual cash value coverage, you may get very little.
How does a renters insurance deductible work?
Your renters insurance deductible is the amount you will need to pay before your coverage kicks in. If you have a $500 deductible and have a $2,000 claim, you will pay $500, and your insurance company will pay $1,500.
How does a renters insurance payout work?
The renters insurance company will review the claim. It may send a representative to review the situation.
If the renters insurance company approves the claim, the company will offer a payout amount.
One major factor of the payout amount is whether you have full replacement cost or actual cash value coverage. Full replacement cost reimburses you for what the damaged or stolen items are worth new. So, if a thief steals a TV you bought for $1,000 three years ago, the renters insurance company would pay you the full amount to replace the TV.
Actual cash value pays the depreciated value. So, a three-year-old TV that you bought for $1,000 will be worth less. Full replacement coverage is more expensive but may be worth it to get full reimbursement for stolen or damaged property.
Once you agree to the payout, the renters insurance company will provide a check for the amount minus your deductible. The deductible is what you have to pay after you file a claim.
How does renters insurance work with roommates?
Renters insurance companies may allow you to add a roommate to your renters insurance policy, but you want to be careful about signing up for a policy with someone else. Adding another person to a renters insurance policy increases the insurance company’s risk, so you’ll pay more for coverage.
The average renters insurance rate is $363 annually or $22 a month. Costs vary by coverage and location. So, getting a policy on your own won’t cost you much.
Your landlord may require that you have a renters policy. You may decide to share one with your roommate, but it’s usually a better idea to get separate policies.
With your own renters insurance policy, you can make a list of your possessions and get coverage for those personal property. Your roommate can also get their own policy for their possessions. That’s usually a better idea than adding a roommate to your policy.
FAQ: Renters insurance
How long does renters insurance last?
The standard home insurance policy length is one year. Many renters policies will renew automatically as long as you continue to pay your premiums.
How do I file a renters insurance claim?
To file a claim, contact your insurance agent or company. Many insurers also allow claims to be filed online or through an app.
Does renters insurance cover damages when moving out?
It might. It depends on the cause of the damage and the type of damage. It’s best to discuss the situation with your insurance agent or representative.
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