Do You Really Need Renter's Insurance?

Photographed by Gunnar Larson.
Like many kinds of insurance, renter's coverage can seem like a thanks, but no thanks deal. After all, if you never end up using it, haven't you just spent a portion of your hard-earned paycheck on something for which you'll never be refunded?
Well, sure — you could look at it that way. In 2014, only 37% of renters (including a recent Money Diarist fighting for compensation from the theft of her grandmother's jewelry) had renter's insurance, compared to 95% of homeowners who had an insurance policy.
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"Homeowners are often required to have insurance by their mortgage lender, but there is no such requirement for renters, so it's considered more of an optional thing," says Judy Dutton, the senior editor of Realtor.com. "I also think a lot of renters have this idea that renter's insurance is expensive, but really, the cost averages around $15-$30 per month — the price of two movie tickets... If you can skip out on two movies a month, you can have the peace of mind of having your possessions covered."
Think of it as being more selective with the films you see in person, and making better use of your Netflix/Hulu/Amazon accounts — with the bonus of being able to rebuild your wardrobe in the event of a fire.

The average two-bedroom apartment can easily contain $20,000 worth of personal property.

A lot of renters mistakenly assume that if anything happens to their things, their landlord can and will step in. Keep dreaming. Your landlord's insurance covers losses to the structure of the building that you're renting, Dutton explains. You are responsible for the personal items in that building. She says that a common excuse renters use for not getting insurance is that they don't have much stuff, but "when you sit down and take inventory of what you do have, the average two-bedroom apartment can easily contain $20,000 worth of personal property." That's a lot to lose.
To determine what policy is best for you, write down a list of belongings that you might want to cover and their value. Then, compare that against any policies you are considering to see how much you would be covered for those items — and don't immediately leap at the cheapest option.
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"In addition to having insurance at all, renters need to consider whether they have an adequate amount to cover their property," says Christina Phillips, an attorney at Merlin Law Group. "For instance, high-end jewelry or electronics can have a cap under a typical renter's policy. If there was a break in and someone’s jewelry was stolen, they may only get $1,000 or $5,000 for that jewelry, even if it cost $10,000 or $20,000, because it was not properly insured."
In other cases, Dutton adds, while basic electronics may be covered, jewelry is often separate. So while there's no must-have amount you should aim for in your policy, you should shop around and think about whether the policy you're purchasing will actually do you any good, or even cover other appealing perks. For example, she notes, renter's insurance may sometimes cover the cost of accommodations in the event that your apartment becomes unlivable, like after a flood or fire. It might even cover loss of property away from home.
"Every policy is based on its own particular language, but a renter’s or homeowner’s policy can have verbiage or language that [states that] even if you’re on vacation and you take your suitcase with you and your suitcase is stolen from your hotel room, there may be coverage," Phillips says. "There are limitations about personal property being covered outside of your home, but yes, you could sometimes make a claim for a stolen bike if it was covered under your insurance."
She says the same caveats apply here (for example, my old dirt bike stolen off of the street is hardly worth the same amount of money as an Olympic triathlete's bike), but you might be able to make it work for you.
Finally, once you've chosen a policy you feel comfortable with, Phillips says it's crucial to read through it before you totally commit. The policy will be very specific about what it will and will not cover, so don't assume that it has everything you want just because you asked for it. After that, you can sleep a little easier.
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