Not sure why you need renter’s insurance before you move? To put it plainly: you’ll need a renter’s policy to cover anything you can’t immediately replace. In fact, if you’re renting an apartment, condo, or house, there are very few scenarios where it’s just a waste of money. While not required by state law, renter’s insurance may be required in your tenant agreement. But, is renter’s insurance a good value for consumers?
Besides taking care of everything most people expect their landlord to do, renter’s insurance can majorly cover your tail in different scenarios. Yep, even if you’re facing a lawsuit! (Of course, we hope a situation never goes that far.) In the interest of helping you settle into your new place as smoothly as possible after you move, we’re shouting from the rooftops just how important it is to have renter’s insurance. Ken Robinson, our go-to property insurance expert and CEO of Houston-based MAKZ Insurance Company, explains why renter’s insurance is a must when you move.
1. Renter’s Coverage Can Pay For Itself 40x Over!
A bit overwhelmed by all the industry vocabulary around renter’s insurance? Let’s break down three commonly confusing insurance terms in an easy way:
- Premium- What you pay for renter’s insurance; often referred to in annual terms
- Deductible- What you pay before your policy coverage kicks in
- Liability- The amount of personal protection covering you, up to which an insurer will pay if you’re held liable for damage or injury by someone else; can include legal fees, repairs/damages, medical bills, etc.
Renter’s insurance is not expensive. It’s very affordable, despite what you may think. Here are a few reasons why:
- Renter’s policy premiums have been falling since 2015
- You don’t even have to nix your Starbucks habit to afford a $15-$50 monthly premium that covers $10,000-$40,000 of personal property
- Average renter’s insurance premiums in Texas are $232/ year (or $19/ month) as of 2017, (III.org)
- Discounts may be available based on your age, job, or residential amenities (e.g. security systems, fire extinguishers, deadbolts, or sprinklers)
- Ken advises combining a renter’s policy with your auto insurance for a multi-policy discount
By these numbers alone, it’s obvious why you need renter’s insurance if you’re moving into a new rental property:
At bare-bones minimum (or, $19 per month for $10,000 in coverage) renter’s insurance can pay for itself 40 times over if you have to file a claim in Texas.
Sure, you’ll have to cough up $250 to $1,500 in your own cash for a deductible. So what? That’s nothing if you don’t have renter’s insurance and a fire destroys $30,000 worth of everything you own. Or, if someone sues you for $20,000 in medical bills and loss of income after injuring themselves in your apartment. See how it can be helpful in a pinch? This brings us to our next point…
2. It Can Help if You’re Held Liable (Or Sued)
“How insurance really works is, what started or what created the risk to happen,” Ken explains.
“So, I always use the scenario of, if a tree fell over and fell on top of your neighbor’s home, the question is going to be asked, ‘What caused the tree to fall?’ So is it [the] wind that caused the tree to fall? I say that because, in the event of the fish tank scenario, you’re liable because you bumped into it and it leaked to your neighbor’s [home].”
No one expects bad things to happen, but they do. That’s a part of life. But, in the insurance world, you might have liability for what happens. Whether it’s by negligence or an accident on your part, you can still be held liable for the fallout of certain circumstances. (Yes, even if you’re only renting a place and don’t own it). A landlord, visitor, or neighbor who suffers damages or injury by any action or negligence of your own can force you to pay or file a lawsuit. No one wants to deal with legal fees or owe someone money.
That’s where a rental policy can save the day. Renter’s insurance is an absolute must in times like this since basic policies cover a minimum of $100,000 in liability. Even incidents that aren’t intentional or malicious can potentially lead to huge problems for you legally and financially.
Renter’s insurance helps financially protect you against liabilities like:
- If your kid throws a ball and breaks a neighbor’s window
- You accidentally break your aquarium, and it leaks to the unit below, ruining your neighbor’s mattress
- Someone trips on your rug and twists their ankle, needing medical care
- Your dog bites another resident and they sue
- A visiting relative leaves a candle or cigarette unattended, causing fire damage
- Pests like bed bugs, mice, or roaches, hitch a ride to your new residence, infesting your new rental property
There are exceptions, however. Renter’s insurance liability extends only to third parties. If you or someone living in your rental residence is hurt, related medical expenses won’t be covered. Renter’s policies don’t cover structural damage. (Since you don’t own the house or apartment structure and therefore you’re not considered responsible for it.) Violating the terms of your policy can lead to insurers dropping your coverage. It could also leave you paying 100% of related damages out-of-pocket.
For example, many renter’s insurance policies explicitly deny coverage to so-called ‘dangerous dog breeds’ (such as pit bulls, German Shepherds, Alaskan Malamutes, and more). So if you do decide to take in such a pup who ends up biting someone, your policy won’t cover it. All the related medical and/or legal bills would be your responsibility. Read and stick to the terms of your renter’s insurance policy, and you won’t have to worry.
3. Renter’s Insurance Protects Your Personal Belongings
One of the biggest reasons why you need rental insurance? It covers your personal belongings.
“A renter’s [policy] is definitely worth it,” says Ken. “If you have a television in your home that you spent $5,000…or even if you spent $200 on it, you purchased it. So in the event that something happens to it, someone steals it, you get smoke damage in the home…you want to make sure your stuff is covered. If you don’t have renter’s insurance, you’re pretty much starting over.”
Think about everything you currently have—no matter when you bought it. How much does every single item you own cost? Estimate. Add it up mentally. And it’s not just monetary value… Consider how many years it took you to gain it all. Could you afford to spend time and money replacing every single thing you love if it were instantly destroyed?
Personal property coverage is in your renter’s policy. Not only will it cover theft from where you live, but it can also cover theft from your car during traveling! Pets aren’t included. Your more expensive items—like jewelry, collections, electronics, antiques, artwork, or instruments—most likely need additional coverage (a.k.a, endorsements, floaters, or riders.) If you have anything of monetary or sentimental value, ask your insurer about getting added coverage.
Your personal property will be covered under renter’s insurance as long as you:
- Keep your policy up-to-date. Coverage can lapse without warning if you cancel a payment method. Also, revisit your policy as you acquire more items, grow your family, or adopt pets
- Update & take inventory of your stuff. It makes filing a claim and moving much easier. (Use photos, video, receipts, documents, serial numbers, and more to prove how much your stuff is worth)
- Read your policy limits. This is how much insurers will pay for certain types of property damage (e.g. how much the company will pay for cash, jewelry, business items, appliances, etc.)
- Know if your policy uses Actual Cash Value (ACV) or replacement cost. Basic renter’s policies default to ACV, which deducts value from items based on age and use. You can add on replacement cost for about 10% more, but it reimburses you with a new item at full & current value
- Get a flood add-on or comprehensive insurance—especially if you rent a home in Texas or are on a first-floor unit. Flood and storm damage to your things are not covered under renter’s policies
4. It Can Help You Move Out of a Damaged Rental
Renter’s policies cover expenses incurred by loss of use. Loss-of-use coverage is what insurance companies will pay for costs that exceed your normal living expenses until you move back in or find a new place. Let’s say your residence becomes uninhabitable from a covered event. While your landlord’s policy covers their content and structural property damage, it doesn’t cover you or your personal items at all. Additionally, landlords are not required to help you move out temporarily, and landlord policies don’t extend to cover tenants.
Many tenants are shocked to find out that landlords are not legally required to cover their hotel costs if a property is unlivable. That’s where renter’s insurance can help you move out. Your destroyed items or additional living expenses you incur from loss of use (i.e. moving out of a damaged residence and paying for hotels, movers, food, etc.)—are all covered.
You could even move somewhere new if you prefer. Especially if you have to break your lease because the damage is so bad that you can’t return.
5. It May Be Required in Your Rental Agreement
If you’re still on the fence about renter’s insurance, be aware that landlords are wising up and starting to add clauses to their tenant agreements that hold renters accountable. These clauses also help landlords protect themselves from sky-high repair costs, legal fees, and loss of rental income. So, do you really need renter’s insurance? Is renter’s insurance even required in Texas?
Lots of newer tenant agreements are making renter’s policies mandatory in Texas. In some states, this clause is mandatory. Although it isn’t required by the state of Texas, Ken says most tenants should still get need renter’s insurance. A growing number of leasing or rental agreements are even making it mandatory.
Sometimes, there are even policy limit requirements for tenants in these agreements. You could be held personally liable and have to pay out-of-pocket if you let your renter’s insurance lapse, don’t meet the minimums in your tenant agreement, or don’t have it at all.
We get it, you’re really excited about your big move (and that’s awesome!) Why not protect the investment you put into moving your personal belongings by getting renter’s insurance, too? You never know what could happen. Now that you realize why renter’s insurance is worth it, don’t just get a random policy, and call it a day.
- Take inventory of everything you own.
- Document and keep receipts of the new things you buy.
- Find out how much your already-owned items are currently worth so you don’t get sticker shock if they must be replaced at your policy’s ACV (Actual Cash Value).
- Most importantly, arm yourself with a policy that you’ve actually read.
Know your policy terms well. If anything ever happens, you’ll understand why you need renters insurance coverage to help.