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Can You Afford To Skip Renters Insurance?

Mortgage lenders require it, but only about 40% of renters buy renters insurance.
06/28/2016 11:40am ET | Updated December 6, 2017
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Whether they're in Philadelphia, PA or Houston, TX, the first thing people think about when they rent a new place is getting renters insurance to protect their belongings, right? No, not really. Almost all homeowners have homeowners insurance -- 95% of them, according to the Insurance Information Institute. Mortgage lenders require it, after all. But only about 40% of renters buy renters insurance. If you're a renter, you may be wondering how much is renters insurance -- most policies will cost you about $15 a month. But if your laptop is stolen, for example, it'll cost you much more than $15 to replace it. And there are other considerations that should help you rethink your decision to skip renters insurance. Here are a few.

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1. Your belongings are covered
This one might seem somewhat obvious: If someone breaks into your rental unit and steals your personal property (computer, electronics, jewelry, clothing, bicycle, etc.), you can't expect your landlord to help you replace those items ... unless you can prove the landlord was negligent by not providing a lock for your doors or windows, perhaps. Otherwise, you'll have to pay to replace your belongings. If you're living paycheck to paycheck as it is, you may have trouble replacing those belongings without going into debt.

Having a renters insurance policy in place could save your wallet, however -- and in most cases, your personal property would also be covered if it were damaged by lightning, fire, vandalism, volcanic eruption, and other natural disasters. Of course, there are state-by-state exceptions: California renters, for instance, are not covered for damages from an earthquake, and Florida tenants are not covered for damages from a natural flood. Earthquake and flood coverage both usually require a separate policy. Your policy will spell out in detail which disasters are covered. Moral of the story: If you don't want to replace everything that could be stolen or be ruined by Mother Nature at retail price, you should get renters insurance.

2. Your policy covers your stuff even when it's not in your home
Any valuables you keep in your car or that you bring with you, such as on vacation, are covered by most renters insurance policies. Renters insurance will reimburse you the same amount whether your bike is stolen from inside your apartment or while parked outside your favorite coffee shop; but whether your insurance pays what your property is worth (actual cash value) or the cost to replace it (replacement-cost coverage) depends on your policy.

3. It covers other people's stuff, too
Your renters insurance policy sticks with you when you (or, say, your kids) go out into the world, such as to a friend's house or shopping. "If your kids decide to horseplay in the china department of a store, can you afford to pay for the damages to the merchandise?" asks Eric Narcisco, CEO of Effective Coverage. "That's property damage liability, and renters insurance pays for that."

4. You could stay in a hotel in case of emergency
If your rental unit is rendered unlivable for a time because of damages from a disaster, such as a fire or a storm, the cost of a temporary hotel stay would likely be covered by your renters insurance. Your policy should kick in even if your neighbor has a fire and management must turn off utilities to your building for a few days to make repairs. "Loss-of-use coverage on your renters insurance could take care of that for you," says Narcisco.

5. You're covered if someone gets hurt on your watch
What if one of your friends is injured in your apartment because of clutter left on the floor? If the friend rolls an ankle because they stepped on your dog's chew toy, you're technically liable for the medical costs. You're also accountable for legal costs if your guest files a lawsuit. The liability part of renters insurance will cover that for you. It also covers damages to the apartment that you caused, such as water damage from letting a bathtub overflow. The landlord will probably sue you to pay for damages not covered by your security deposit, and that's when your renters insurance would kick in.

6. Third-party property damage? Covered
Let's look further into that overflowing-bathtub scenario. What if, in addition to damaging your apartment, the overflowing tub also caused damage to your neighbor's unit below? Or what if you drove your car into your neighbor's fence? The cost of repairs in both instances will often be covered by your renters insurance.

An important note about property damage: Renters insurance doesn't typically cover damage done to your rental property by another person. If someone were to break your window, for example, and that person doesn't have renters insurance, you'd be on your own for working out the costs.

7. Further consideration
Note that renters insurance comes with coverage limits, so know what is and isn't covered in the policy you select. You also decide how much liability and personal property coverage to buy. For example, you might decide to get $300,000 in liability coverage and $50,000 in personal property coverage. "If you can't afford renters insurance, you can't afford to be without renters insurance, because a loss would be devastating to your family," says Narcisco. Before you decide renters insurance is one more expense than you need, think hard about what it'll cost to replace your belongings -- or pay damages -- out of pocket.

Do you think renters insurance is worth the money? Share your thoughts in the comments below!

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