4 myths about renters insurance

Think renters insurance is unnecessary? Here's how it can save you money -- now and later, when you really need it.

By MSN Smart Spending editor Sep 13, 2013 6:23PM
This post comes from Sienna Kossman at partner site U.S. News & World Report.

MSN Money partnerFor approximately the cost of a delivered pizza dinner each month, renters insurance can protect your personal belongings and save you from legal or medical expenses associated with an accident in your home. However, many renters believe that taking out the insurance is unnecessary or too expensive.

Image: A rental agreement and two keys on a house shaped key ring © Epoxydude, fStop, Getty ImagesHere are some common misconceptions about renters insurance, along with tips on how to pick the best policy for you:

Myth No. 1: "I don't have enough stuff to need insurance coverage."

Since all rental properties are susceptible to a variety of damage, whether it be fire, theft or even a broken kitchen appliance, many experts say there isn't a scenario in which a tenant should go without renters insurance. But it is important to weigh the associated costs, both monetary and sentimental.

A common reason individuals avoid renters insurance is they do not think their belongings are worth the coverage. "Many renters underestimate the value of their possessions and would be surprised by how much it would cost to replace the items they have accumulated," says Emily Lyons, a Liberty Mutual property insurance expert.

If renters think they do not have enough stuff to warrant a renters insurance policy, Keith Rutman, vice president of specialty property lines for Allstate Insurance, suggests they go around their residence, room by room, and take full inventory of their belongings before making a decision.

"Most people usually only think of the big-ticket items, like electronics, but if you really think about it, it's so much more in that," he says. "For example, in your kitchen, it's not only the appliances, but the towels, dishes, utensils and food, too. We find that the average renter in a two-bedroom apartment has about $30,000 worth of stuff."

Along with evaluating how much your belongings cost, it's important to consider how much you personally value those items. In some situations, how much you care about your belongs may override cost in your decision to take out a renters insurance policy. "For example, if you just got out of college, are renting a furnished apartment, hardly have any stuff and are not a high-risk person in terms of your lifestyle, you might not care, or need to care, about protecting your belongings," says Robert Hunter, director of insurance for the Consumer Federation of America. "However, if you are renting a penthouse apartment with priceless art on the walls, then you most likely would."

Myth No. 2: "My landlord will cover property damage."
Occasionally, a landlord may partner with an insurance company to offer renters insurance to tenants, but more frequently, the insurance policies that landlords hold for their properties  protect only the building itself. "After acquiring a rental housing unit, landlords change their insurance policies from a traditional homeowners policy to a rental policy, and when they do that, it only covers just the structure, not the content or any of the tenant's belongings," says James Emory Tungsvik, president of the National Association of Residential Property Managers.

Even if the landlord owns appliances or other items within your rented home, he or she is not responsible for damage they inflict on your personal property. "Say you just bought a few hundred dollars' worth of frozen food and you stuck it in the freezer that the landlord owns, and it breaks down, spoiling all the food," Tungsvik says. "If you wanted coverage for that lost expense, the landlord would not responsible for it. That would be part of renters insurance."

Myth No. 3: "Renters insurance only covers my personal belongings."
Accidents, such as a flood in your apartment, may damage other tenants' property and can be costly. Renters insurance can protect you from these situations and help cover those unexpected costs. "For example, if your bathtub overflows and water seeps into the apartment below, damaging your neighbor's furniture or rug, your renter's policy will cover the damage up to your liability limits," Lyons says.

This liability protection can cover medical or legal expenses associated with your home. "If you are entertaining at your home and, say, someone trips over a loose rug or injures his or herself in your apartment in some way, could you afford to pay the potential medical expenses associated with that, but in the event of a lawsuit, could you pay the legal expenses as well?" Rutman asks. "A typical renters policy will cover that full range of risks that any renter could be exposed to."

Myth No. 4: "Renters insurance is too expensive."
Unlike car insurance or a typical homeowners insurance policy, a renters insurance plan is not a large additional monthly cost. "You are probably looking at about an additional $185 a year," says Tim LaCasse, a State Farm insurance agent. "I try to tell people that for less than $20 a month, all your personal property is protected." Policy premiums can vary between individuals, providers and location, but as a whole, renters can expect to pay about 50 cents per day for a renters insurance policy.


For even more savings, many insurance providers offer multi-policy discounts to customers who add renters insurance onto an existing insurance package. On average, bundling can decrease overall monthly insurance costs by approximately 5% to 10%, according to LaCasse.

However, even though renters insurance is less expensive than homeowners insurance, it could still become expensive if consumers are not careful, regardless of the policy type. "You have to shop around," Hunter says. "You could pay twice as much with one company than you would if you had a policy with another. I recommend calling your state's insurance department and ask them to recommend the top five renters insurance providers in your state. Then give those places a call to get some quotes before making a final decision."

How to choose a policy
Renters insurance coverage needs are different for every individual, based on factors like age, location and protection needs from things like natural disasters. But in general, there are two important areas to understand when choosing a renters insurance policy: what the policy covers and whether that coverage is actual cash value or the total replace cost.

An actual cash value policy would cover your belongings contents for what they are worth today. "So if you purchased a flat screen TV for $1,000 two years ago, and you are going to resell it today, it might only be worth $200," Rutman says. "An actual cash value plan is going to take into account the depreciated cash value of your property, and it's going to pay you for that depreciated value."

The other option is total replacement cost coverage, which will pay out the dollar amount that it costs to replace a renter's property today. So, with this type of policy, you would be able to replace that $1,000 flat-screen TV without an additional cost, regardless of how old it was at the time of loss. Replacement cost policies often come with a slightly higher premium, but in the long run, the extra few dollars a month can be worth it.

If the cost difference between a cash value policy and a total replacement policy is small, experts suggest going with the total replacement policy. But depending on the condition of your belongings, a cash value policy can be a cheaper and just as effective option, according to Hunter. "If (you) have relatively new stuff, a cash value payout for replacing that new stuff will be almost the current value of it," Hunter says. "And on the other hand, if (you) have really old stuff and the policy premiums are a lot different, then I would go with actual cash value. You really have to analyze your individual situation."

Once you decide what type of protection you need, the next step is to develop a value estimate and inventory of your possessions. Many insurance companies offer value estimation calculator tools, so check with your provider to make the most of all available resources during the deliberation process.

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20Comments
Sep 13, 2013 10:42PM
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This article makes one very good point, even if you think your stuff isn't valuable or worth insuring you'll still want to replace it should something go wrong.    If you were to add up what it would cost to replace all your possessions, it would add up quickly.      Insurance is one of those things you'll wish you had when something goes wrong.
Sep 16, 2013 4:58PM
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I always thought that renter's insurance was a waste of money. However, when a friend of mine recently moved into an apartment complex she was compelled by the owners to purchase renters insurance. Approximately 2 months after moving in she received a distressing call from one of her children while she was cooking dinner. Taken aback by the call, she forgot that she had dinner on the stove and it burned, which created a lot of smoke in the apartment, setting off the alarm. The smoke was very intense to the point that she had to call the fire department; who installed an egress fan in the windows and doors to evacuate the smoke. I spoke with her the next morning, she was very anxious because all of her work clothes smell like smoke. I advised her to cal her insurance company. They came out the following day, did an inspection, and 1 week later she received a check for $2600.00 to cover cleaning of her clothes, furniture, and replacement of the dutch pot she was cooking in. I guess I know better now.
Sep 16, 2013 10:22AM
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When I added the renters policy to my existing car insurance, the multi-policy discount was more than the renters premium.  My monthly payment went down by a few cents.
Sep 15, 2013 12:58PM
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As a licensed insurance agent, I can tell you that a renter's policy offers one of the best, (if not THE best) values in insurance, in terms of premium cost versus coverage.

Most polices offer at least a 100k in liability, replacement cost protection of tens of thousands, medical payments, and on and on . . .

All this for 20$-40$ per month.

As with ANY policy, read your declarations page carefully, make sure that you understand each and every coverage and exclusion, and if you don't, ask for an explanation.

Most polices will differentiate between "loss" and "theft," for example, or "burglary versus robbery." All policies limit coverage for easily stolen and transported valuables like jewelry, firearms, and cash. Make sure you understand those limits, and you may want to "schedule" such property (add coverage by endorsement) if you have large amounts of valuable property.


As I often tell people:


"Insurance coverage is a lot like air. You won't really notice it, or miss it . . . until you have NONE of it."


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Sep 16, 2013 12:18PM
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A good idea is to get renters insurance from the same company that the landlord uses for the property insurance. This eliminates the problem that could arise if there is a grey area as to which policy should cover a given incident..
Sep 18, 2013 10:06AM
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This site is what made me decide to get renters insurance!!! If it hadn't been explained to me the way these guys on here do, I may never have bought it?! Thanks to this site, and to those that post their personal experiences on it!!!!!

 

I have not needed it yet, but I sleep much better at night, no matter where i'm at!!!!

 

Thank you to all of you!!!

Sep 13, 2013 11:23PM
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I had a renters policy with replacement coverage. When one of the apartment employees got in using a key he stole all kinds of stuff. After a detailed inventory they paid like clock work. Own a home now and I have a replacement policy. I did an inventory of all goods and some serial numbers so in the event of a loss I can show proof. There was eight units lost blocks from my house and no one had insurance. 
Sep 18, 2013 5:46PM
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The first time I was offered renters insurance by my agent the price was $12 a month and then I got a $12 a month multi-policy discount since I already had auto insurance through them.  My only thought was "what kind of an idiot passes on that?"
Feb 21, 2014 9:14PM
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IF MOVED IN 3 DAYS CAN I RENTER INSURANCE

 

Sep 18, 2013 4:02PM
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The loss of use is big problem. Past april my apartment was flooded and in 24 hours landlord told us to vacate the property into a hotel to restore the property. it took us 2 weeks to find a furnished apartment while our belongings were taken to a warehouse. We going bankrupt by hotel bill.
Sep 13, 2013 11:19PM
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I purchased a rental policy with a
Sep 16, 2013 1:50PM
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Insurance companies sell air...take responsibility for your own stuff. Be self insured, keep some money under the pillow. This article resembles a sales pitch.
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