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What Is Renters Insurance?

Renters insurance also called tenant insurance, offers protection for your personal belongings, pays medical bills and legal expenses if someone is injured on your property, and provides reimbursement for unexpected living expenses if you’re forced to temporarily move out of your home.

It’s a policy designed to protect the belongings and financial wellbeing of a tenant living in a property they don’t own. But, if you have roommates, your renters insurance doesn’t protect them unless you’re on the same policy together — which we really don’t recommend.

What Does a Renters Insurance Policy Cover?

Personal Property

☘ This coverage is for all of your most-treasured belongings that you keep inside your home or, if you’re renting a house, on your property. If a covered peril damages or destroys those items, filing a renters insurance claim can help pay to repair or replace them.

Personal Liability

☘ This can include expensive medical bills and lawyer fees if someone is injured on your property and you’re found liable. It can also include minor medical expenses (up to $5,000) for injuries — no matter who is at fault.

Loss of Use

☘ This is your best friend in dire straits, kicking in if the property you rent has been severely damaged or destroyed, by something like a fire or hurricane, and you’re forced to temporarily move out. It can reimburse you for a new place to live and other expenses you incur.

Examples of Renters Insurance Claims

Personal Property Claim Example

☘ You’re sitting at work when you get an urgent call from your roommate to tell you that your home has been ransacked. When you arrive, you find that your personal laptop, TV, gaming system and even leftover cash have been stolen by the burglar. If you have renters insurance, filing a claim can help you replace those items without spending more than your deductible.

Personal Liability Claim Example

☘ You have a dog that loves to play around and a friend who loves to antagonize them. Things go a little too far and your dog winds up biting your friend, who sustains a significant injury that requires many stitches and follow-up physical therapy. Personal liability coverage may take care of all the related expenses up to your policy’s maximum.

Loss of Use Claim Example

☘ A kitchen fire erupts and quickly spreads through the apartment before it can be distinguished. When the flames flicker out, your apartment lays in ruins and needs to be repaired, causing you to temporarily move into a new home. Loss of use can help reimburse you for a home of equivalent size, storage, pet boarding and other expenses you face due to the move.

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What Does Each Coverage Protect?

Personal Property

☘ Furniture
☘ Clothes
☘ Electronics
☘ Jewelry
☘ Sports equipment

Personal Liability

☘ General medical bills
☘ Surgery costs
☘ Physical therapy visits
☘ Lawyer fees
☘ Court costs

Loss of Use

☘ Monthly rent
☘ Storage fees
☘ Pet boarding
☘ Food and eating out
☘ Gas, tolls and parking

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Is Renters Insurance Required?

Although renters insurance isn’t required by law, some stipulations allow landlords to write verbiage in or create an addendum of the lease agreement that makes it mandatory for each tenant of the property to maintain adequate renters insurance coverage.

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Why Do I Need Renters Insurance?

Even though it’s not required, you should definitely invest in renters insurance! You never know when a disaster may strike until it’s too late. And if that disaster is out of your control and destroys or damages your belongings, why should you have to pay to replace them? That’s what insurance is for!

You need renters insurance for those instances. Plus, it offers pretty incredible peace of mind knowing that someone can break into your home, your neighbor could accidentally start a home fire or a hurricane could carry away your belongings and you can get them all back simply by paying your deductible.

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How Much Does Renters Insurance Cost?

The average price of renters insurance in the United States is about $175 per year. That’s incredibly cheap when you consider the average person has more than $5,000 worth of belongings. Each state has different prices and your premiums also depend on your coverage maximums and where you live.

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Additional Components of a Renters Insurance Policy

Actual Cash Value vs Replacement Cost in Personal Property Coverage

When insuring your personal belongings with adequate personal property coverage, there are two options you can choose from.

The first type is actual cash value coverage, which includes depreciation and other factors to pay you the amount each item was worth at the time of its theft, destruction or damage. It means that a computer you bought five years ago for $1,200 will not be paid out that amount by your insurance company. Sure, it may cost the same amount to buy a new computer, but actual cash value is similar to the used price of each item.

The second type, replacement cost coverage, doesn’t factor in depreciation or any other external damages or defects. If it works, you’ll get the same amount you paid for it — no matter how old it is. That means the $1,200 five-year-old computer is still worth $1,200 on the day it was stolen, damaged or destroyed. But since you’ll always get more money with replacement cost coverage, it will also cost more in premiums each month.

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