Why you should get renter’s insurance
Are you a renter? Do you have renter’s insurance? No? STUPID!
Ok, now that you know you’re stupid, let me explain.
Why you should get renter’s insurance
1. You’re stuff is valuable! Go around your apartment and start adding up the replacement value if you had to buy all that stuff brand new. You’d be surprised that it will easily reach into the thousands, even the tens of thousands.
While you might only have a 20″ TV with rabbit ears right now, if that TV is melted in a fiery inferno, how much would it cost to go buy a new 20″ TV? How about that dining room table, your bed, computer, pots, pans, dishes, rubber ducky, kid’s toys and so on? While you can find replacement items on Craigslist or eBay, they aren’t always available when you need them. And we know you can’t take a bath without your rubber ducky. Renter’s insurance will reimburse you for all your lost items.
2. Your landlord’s policy doesn’t cover your stuff. If I were to rent my house out, my policy would only cover the structure and my own stuff in it, not yours.
3. It protects you outside of the apartment. With most policies, you also get liability coverage, which protects you from events such as your dog biting the neighbor or someone slipping and falling on your icy steps (if it was your responsibility in the rental contract to shovel and salt them).
4. It’s cheap as heck! (at least compared to a homeowner’s policy). When we rented our last apartment prior to buying our home, we paid about $200 for the whole year for $20,000 worth of coverage. Compare that to our $700-800 yearly premium on our home.
5. You can probably get a multi-policy discount if you go through the same company who holds your auto insurance (if you have a car). The discount is generally 10%, to BOTH policies.
It’s easy to assume the worst will never happen to you (fire, theft, flooded toilet), but it does…very often. Our own neighbor’s garage was destroyed in a fire this past weekend, totaling a number of antique cars. I sure hope he has insurance!
The first step is to call your auto insurance company and ask for a quote. Then call around to other respectable agencies to compare prices. It really doesn’t take long, and they can easily mail or fax you the forms rather than make you come into an office to sign off.
For a few hundred dollars a year, you can have peace of mind that you’re covered if that disaster does happen.
Photo by cnynfreelancer
You should caveat that renter’s insurance will reimburse you for all your losses. This is simply not true. Policies differ on what is covered and the base policy does has limited coverage for certain items, which you would need to have a rider to schedule the items beyond the base policy.
liability coverage is also another one of those that are limited and will vary on what it covers.
i agree, it is silly not to have renter’s insurance if you are renting an apartment, especially if you are in a complex or have adjacent units. I have renter’s insurance because I have no idea if my neighbors are idiots or not and keep the iron on or something.
Reformed Spender says
I got renters insurance after my neighbour’s house burned to the ground, sending sparks over the house I was renting. Luckily for me, it didn’t catch, but evacuating my house with nothing but my guitar was a great wake-up call.
My policy covers all perils, including mysterious disappearance (if somebody swipes my laptop at a party for example) and toilet backup.
Pretty good value for the low monthly payments considering my books would cost me a fortune to rebuy. Think about the cost of a shopping trip if you literally have no clothes but what you’re wearing.
Clever Dude says
@Tim, I’ll let that be the caveat.
Luckily, someone told me about renters insurance when I got my first apartment. I never had to use it but it was there if I need it. The cost of the coverage is very minimal for the protection that it offers.
Jennifer Rogdakis says
I agree with this post totally and I think it’s an important topic. I feel that people always forget how necessary this is. I rented an apartment in a house for 4 years. In that house were 2 other apartments. One day I found out that one of the tenants almost burnt the house down cooking a turkey. Then it clicked in my head that it’s not just my job to be responsible in the house, that any of the other tenants actions could burn down my apartment too! At that point I got renters insurance and it was great for my piece of mind. Like you said it was very inexpensive. I was even able to add my engagment ring to the policy once I got engaged!
Tight Fisted Miser says
Don’t have it and ain’t gonna get it. At least not anytime soon. I prefer to self-insure. I’m way ahead by doing it this way.
When I lived in an apartment, my lease required me to have renter’s insurance.
When you do get a renter’s policy, the most important thing is to make sure you get “replacement coverage.” Most policies have a default of “actual cash value,” and you have to pay a little extra for replacement coverage, but it’s worth it!
Say you lose your living room furniture in a fire. You paid $1500 for it 3 years ago, and it would cost $1600 now to buy a new, equivalent set, but since it was 3 years old and used at the time of the fire, the insurance company says it was really only worth $500. If you had “actual cash value” coverage, the insurance company would pay you $500 (minus your deductible) for your loss, but if you were smart and had “replacement coverage,” the insurance company would give you $1600 (minus your deductible) so you could buy a new set.
I have moved into a new apt 4 months ago and have yet to get renters insurance. I didn’t realize the policy was approx 200$/year. For some reason I was under the impression it would be that per month, clearly I was mistaken. Def seems like something I need to look into more and to get covered just in case something goes wrong.
@Tight Fisted Mister: don’t get what you mean by self-insure. renter’s insurance isn’t necessarily for your careless actions (although it covers just in case), but for the idiots around you whose actions and brain farts you cannot control which can impact your property. That is why I have renter’s insurance; moreover, it’s pretty hard to find a landlord these days that does not require renter’s insurance if there is more than one tenant.
@Tim: I think that maybe what Tight Fisted Miser means by “self insure” is keeping enough money in savings to recover from a catastrophic loss, and using the money you would otherwise pay in renter’s insurance to add to those savings. That’s what I do, anyway.
When looked at strictly in terms of dollars, insurance is always a losing proposition, on average. Insurance companies have to bring in more than they pay out, or else they would never make any money. For that reason, it doesn’t make financial sense to insure against losses that you can afford to cover yourself. So making a blanket statement that everyone who doesn’t have renter’s insurance is STUPID is very short sighted.
Clever Dude says
@Johanna and TFM, it’s NOT short-sighted to call it stupid because I would much rather pay $200 a year than try to build up $20,000 in savings…and then pay ALL of that out if catastrophe strikes when I could have just paid $200 or so.
Just think, without earning interest, it would take me 100 years to save up 20,000 if I stash away 200 a year. I would rather invest that money in something else thank you.
The problem here is that your argument also works for buying lottery tickets. Which would you rather do: pay $1 a day for lottery tickets and win a five million dollar prize, or put $1 a day into savings? Just think, without earning interest, it would take 13,000 years to save up $5,000,000 if you stash away $1 a day.
The reason that buying lottery tickets is not a financially sensible investment (although it still might be worth it to some people for the entertainment value) is that the vast majority of people who spend $1 a day on the lottery will not win the top prize. Similarly, most people who spend $200 a year on renter’s insurance will not have occasion to collect the $20,000 payout.
Clever Dude says
@Johanna, no, you’re stretching my words to fit your argument. In the case of the lottery, your chances of winning big are millions to 1, and you’re TRYING to win.
In the case of theft, fire or other events covered by renter’s insurance, the chances are MUCH higher, especially depending on where you live and your living habits. If you’re in an apartment building, then odds go up even higher because you have to worry about others in the building falling asleep with a cigarette in their mouth, leaving the water running, or catching food on fire on the stove. In the case of insurance, most people DON’T want to win (unless they’re a crook), because that means their stuff is totally gone.
I couldn’t come up with reliable probabilities on thefts and fires because it really does depend on where you live. If you live in the boonies, there’s not many people around to steal your stuff. If you live in certain parts of CA, then mudslides, fires and earthquakes MAY be a pretty regular occurrence. If you live in a big city, good luck protecting your stuff.
So comparing winning $5mill to someone stealing your laptop or your apartment catching on fire or flooding is a pretty tough try.
It’s not feasible to “self-insure” for things like home, health, and auto insurance unless you’re really, really rich (like a multi-millionaire) because a devastating loss can wipe out everything you have. For example, my renter’s policy included $300,000 in personal liability coverage, which would cover me in the event that, say, someone got injured in my home and sued me. There’s no way I could come up with $300,000, and the $200 per year that I’d save by not paying for renter’s insurance wouldn’t go very far towards that.
The lottery isn’t a valid analogy because there is less to lose in the lottery. If you consider the worst case scenario in each example, the worst that can happen if you put your money in savings instead of buying lottery tickets is that you have hundreds of dollars in savings. The worst that can happen if you put your $200/year in savings instead of paying for renter’s insurance is that you lose everything you own and have to spend $20k (or however much it costs) to replace it, or perhaps you get sued for $200k because someone gets injured in your home, and all your savings is wiped out and you end up deep in debt.
A similar debate was had here: http://moneyning.com/housing/why-renters-insurance/
I personally am on the side of no insurance or not-for-profit insurers (if there are any).
I think the lottery comparison is fair. Clever Dude, you may be right that the odds of having a fire/theft/other disaster may be higher than winning the lottery, but the fact remains that the odds are still stacked against someone paying renters insurance.
The insurance companies will make a profit for their shareholders on the backs of those paying insurance. If the the odds were stacked in favour of the customer these companies would go bust.
Yes, not having renters insurance is a risk. But I believe that this is a risk that we can underwrite ourselves than have it underwritten by an insurance company.
I have written below possible reasons for insuring and my argument on why the reason may not be valid.
1. Premiums are low. The arguments I see above is that the premium is low so we should get it. Looking at it the other way, the premium is low because the probability of the risk is also low. When we walk on the road there is a possibility that we’ll be hit by some vehicle and get seriously injured or even lose life. But that doesn’t prevent us from walking. We accept that risk because it is low. In the same way we can accept the risk because it is low.
2. House contains expensive stuff. Think again? Should these stuff belong at home? Should that expensive diamond or gold jewel belong at home or in a bank locker?
3. Contents of rented house is more than $15,000 (15,000 given only as an example and could be something higher or lower based on the risk appetite of the individual) If the contents of a rented home is more than $15,000 and if that justifies insurance think again. May be we should be owning a home instead of renting. Or that we must be renting too big a place to pileup more than $15,000 worth of goods. Probably it is time to buy a home or scale down our lifestyle.
4. Have lots of gadgets. If most of the stuff we are insuring consists of electronic items, then it may not be worth it as they fall in value so fast it wouldn’t be worth the effort.
Of course, there may be few people who will still need insurance because of their unique needs. But I believe for most of us renter’s insurance is not required.
Clever Dude says
@Ram, so you’re basically saying if it’s expensive enough to insure, then we shouldn’t own it? I doubt that reasoning. It’s not so much single expensive items, but rather whole homes full of furniture, clothing, computers, and yes, jewelry. And many people rent, rather than own, because it allows them flexibility and mobility. Thinking that once people own expensive stuff that they should get a mortgage is a bit short-sighted.
Regarding getting hit when walking, that’s why we recommend you carry medical insurance (if you live) and life insurance (if you die).
In this post, I’m not talking about $5,000 entertainment systems or $10,000 diamond rings. I’m talking about all your stuff when you add it up together. Just go through your closet and consider the replacement cost if you had the go buy ALL those clothes from scratch.
Oh, and bank lockers cost money too.
The cost of replacing all of your clothing will generally cost the most amount of money. For this reason, you should make sure you purchase “Replacement Cost Coverage”. Most renters purchase at least $10,000 of personal property coverage at a minimum and by combining your auto insurance policy with your renters policy, you may qualify for a multi policy discount which can in many times negate the cost of the rental insurance policy.