Renter's insurance is an insurance coverage policy type that protects you from certain perils when leasing another person's property. You would purchase this coverage to reduce the risk of experiencing a large monetary loss, such as what you would encounter if you have to pay out large sums of money to another party for damages, injuries, or losses. Mari Garcia from Allstate Insurance in Poway, California said, "It is really inexpensive for the peace of mind and protection it gives a policyholder."
As an example, if the property you live in catches on fire because you left a candle lit, and due to that there was damage to the property, water damage to the neighbors, and a lawsuit because someone was hurt, you could be responsible for all of those costs if you do not have the proper insurance in place. These could easily add up to be tens or hundreds of thousands of dollars. If you do not have the money to reimburse your landlord and neighbors for the damages and injuries, you might be sued and have a judgment ruled against you that could take years to pay off. That is where renter's insurance comes in!
If an unfortunate incident does occur, the renter's insurance carrier will step in and defend you against lawsuits, negotiate and pay settlements to others, and reimburse you for your own personal property losses. It will also help with living expenses when you need to rent another place to live while the issues are being resolved. However, beware, as the protection is only for loss types that are covered and only stretches up to the amount of coverage you buy. Coverage amounts run from $10,000 to $50,000 on a typical renter's policy and you decide how much to buy based on the value of your personal property and liability concerns. In effect, renter's insurance tries to minimize what could be major disruptions to your life and livelihood due to an unforeseen, stressful, and ruinous event.
In this way, renter's insurance actually has many similarities to homeowner's insurance – both cover risks and potential losses that may occur for up to the maximum dollar amount limits that you decide upon and purchase. The main difference is pretty simple, though. Homeowner's insurance covers the structure of the building, which you effectively do not have to pay to cover with insurance as a renter. This is the main reason why renter's insurance is so inexpensive compared to a homeowner's insurance policy.
Does the Landlord Policy Cover You, Or Do You Need Your Own Policy?
Many renters erroneously believe that the landlord's homeowner insurance policy covers all the aforementioned types of issues. And many times it does, but only for the landlord and not for you. The landlords homeowner insurance policy does not cover you when the landlord sues you for the damages you caused, or any money the landlord's insurance company had to pay to others, like neighbors, to settle claims with them. It also doesn't cover you if your personal property is stolen, damaged by a flood from the neighbors, or ruined because you caused a fire. Most importantly, the landlord's policy doesn't cover you for liability purposes, like if your dog attacks the neighbor's child and causes the child significant injuries and emotional trauma.
Tenants are not required to have this type of coverage by state law, and only about 43% of renters have a renter's insurance policy in effect, according to an Insurance Research Council poll. However, more and more landlords are starting to require their tenants to have a policy in place, which seems to be a good trend for all parties involved. This is especially true if you have expensive personal property, animals, or lots of guests to your house, as it simply makes sense to better protect yourself from the potential issues that could occur.
In addition, don't forget to alert your insurance carrier and update your policy address when you move. It typically just takes a phone call or email, and will ensure that you get the next policy invoice so you can pay for and keep the policy in effect. Renter's insurance is an inexpensive safeguard, and you don't want to find when it's too late that you've mistakenly let your policy lapse.
Considering a renter's insurance policy to reduce your risk of major financial and living disruptions due to a covered loss is a good idea these days. Unfortunately, most people find that out after the fact and end up spending thousands of dollars to clear up a loss that, at least on the financial side, could have been prevented.