It may seem like the perfect arrangement, but not thinking through your options can lead to problems down the road
If you’re reading this blog post, there’s a high probability you’re renting your current residence. Now more than ever people of all ages, from millennials to baby boomers, are choosing to hold off on homeownership or forgo it altogether. “Rentership” is on the rise but many Americans still have trouble navigating the rental process, including choosing the right kind of renters insurance.
Some landlords require their tenants to obtain renters insurance and even offer them coverage when they sign the lease—but simply going with a landlord’s pick can result in potential risks later. Often, the provided policy is not the right fit for the tenant’s property, budget, and other needs.
Moving to a new place soon? Before you take your landlord’s option for renters insurance—or any policy, for that matter—here are some questions you should ask.
What’s covered by the renter’s insurance policy?
According to the Insurance Information Institute, only 37 percent of renters actually have renters insurance, so it’s safe to say many renters don’t even realize they need it. You need a basic understanding of what renters insurance does and doesn’t cover before you can make a thoughtful decision.
Renters insurance typically provides coverage for a renter’s personal belongings and liability from accidental injuries to guests and property damage. For instance, if your laptop is stolen or your friend is injured while at your apartment, depending on the type of coverage you have, most or all of the expenses will be covered. Renters insurance might also cover additional living costs, like hotels or food, if you’re forced to leave your place for a period of time.
Not all policies are the same, however, so even general coverage can vary among providers. Do your due diligence, ask questions, and read the fine print before signing the dotted line on any policy—whether or not your landlord recommended it.
What’s my property worth?
You should also take inventory of everything you own—from electronics such as your TV to more precious items like family heirlooms. Photograph everything and keep track of your credit card statements. While the process is a little tedious, you might be surprised by how quickly the value of your belongings adds up. In fact, the average renter’s property is worth about $20,000. If you find you need some extra help when it comes to keeping your belongings organized, there are plenty of home inventory apps, like Shortly and Nest Egg, to keep you on track.
Once you know how much your property is worth, you can choose one of two types of coverage: replacement cost coverage or actual cash value coverage. Replacement cost coverage replaces your items based on their original market value, or simply put, the amount you paid for them. Actual cash value coverage, on the other hand, takes depreciation into account, as most tangible items lose their monetary value over time. If you have belongings, such as jewelry, that can be moved easily, you’ll probably also have to invest in a floater policy, as they aren’t typically covered under a normal plan.
Based on your property value and the type of items you possess, you might find that your landlord’s renters insurance option offers too little or too much coverage. Of course, the higher the property value, the higher the cost of the coverage, which brings us to our next question.
What’s the cost?
Considering the high cost of living in the U.S. today, especially in urban areas, renters insurance is relatively inexpensive. The average cost of a policy is around $200 per year, with the 2019 average for New York coming in at $211. Different providers offer plans at different costs, and there are plenty of other ways to save money, including paying for the entire year’s worth of insurance upfront or getting discounts for having safety tools and features, like fire extinguishers and smoke alarms, in your home.
Bundling your car insurance with renters insurance is another way to cut costs. If you decide to get renters insurance on its own, be sure to ask a variety of insurance providers for quotes. It’s free and will ensure you know all your options before you make a final decision.
Don’t rush into a decision on renters insurance
When you’re preparing to sign a lease, the temptation to just “hurry it up” and move in can be enticing, but not taking the time to properly review your options might lead to regret when an unexpected event occurs. Before you agree to any policy—whether or not your landlord recommended it—check the provider’s reviews online, ask yourself the right questions, and don’t quit searching until you find the right fit.
Have other questions about renters insurance? Contact us today.