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Do I Really Need Renters Insurance?

Do you rent, but don't have renters insurance? Learn why you should get a policy in place today.

Imagine you’re sitting on the couch one evening with your significant other trying to decide if you are going to go to bed. All of the sudden you hear a loud pop at the back of your house. You look up to see the entire back wall is engulfed in flames. By the time you get outside, the rest of the house is in flames and you are left standing in the street with no shoes, no car keys, no cell phone… nothing from inside your home.

This may seem like an extreme story, but it is something that happened to my brother-in-law earlier this year. The home they were renting burned to the ground, and they didn’t even have time to grab shoes. They were fortunate to be alive, but it didn’t take long for the reality of their situation to set in. They had lost everything, and they didn’t have insurance.

Many believe that in an event such as a fire, the landlord’s homeowners insurance will cover the cost to replace their personal property. Unfortunately, this is an incorrect assumption. Landlords insurance may cover the physical structure, the personal property they own (such as appliances), and loss of rent, but does not cover the renter’s personal property or the expenses incurred while looking for a new place to live.

Renters insurance is incredibly cheap (relative to other insurance policies). The cost depends on where you live, and how much personal property you have, but for the typical renter it may cost less than $20 per month.

The popular response I get from renters is “I don’t have enough stuff to make it worth getting insurance.” Think about how much it would cost to replace your furniture, electronics, clothes, shoes, kitchen appliances, and everything else in your home. $10,000 - $20,000 may not be an unreasonable amount, and it could easily be more than that.

So what happens after you make the decision and get renters insurance? Document everything in your home that you would want an insurance company to replace. I prefer to have clients walk around their home and make a video of everything in it. Store the video on the internet (so you can access it if your phone doesn’t make it out of the burning home with you) so that you have proof of your personal property.

What do you think? Do you rent, but don’t have renters insurance? Is there a reason you haven’t purchased it? Please share in the comments section.

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Randy1949 August 29, 2012 at 05:11 PM
People tend to forget about the alternate housing costs in the event of a catastrophe. My son had a house fire last November that not only repaired the damage and replaced his property, but it paid for the three months of a rental (not cheap by any means). That was regular homeowners insurance, but the principle is the same. I wonder about flood insurance and the definition of a flood. Does a 'flood' include water damage from burst pipes or water in the basement?
Sarah Millard August 29, 2012 at 05:22 PM
I was one of those that went without renter's insurance. Covering a few too many apartment fires in Waukesha scared me into getting it. I always thought it won't happen to me, and so did the people I interviewed who lost everything they owned in a fire. For me, it's a very minimal expense given what could happen. All it takes is a reckless neighbor or a fault wire to lose everything!
Adam W. McCoy August 29, 2012 at 05:35 PM
Renter's insurance saved my wife and I about $1,000. When we had our daughter, our first child, things like red juice found its way onto the carpet of a home we were renting at the time. I'm not sure if it's the standard policy, but our insurance company USAA actually paid the $1,000 our landlord — the US government as we were living on an Air Force base — said it would cost to replace the carpet. For the record, the carpet wasn't really stained that bad, but they used black lights to examine the house after we moved.
Alan Moore, MS, CFP® August 29, 2012 at 07:54 PM
Randy, The definition of flood is always an issue for folks. Technically, flood insurance covers: 1. Overflow of inland or tidal waters, 2. The unusual and rapid accumulation or runoff of surface waters from any source, or 3. Mudflows caused by flooding. This doesn't include a pipe bursting in your home, which is a peril (or event) that has to be covered by your standard policy. I don't know of any renters/home owners policies that cover any of the perils that flood insurance covers. And not all policies cover water damage, so it is something that you have to read your policy to find out.
Johnny Paycheck August 31, 2012 at 06:48 AM
And the downside of having the fire insurance is that before it gets paid out the insurance company is probably going to try to have you investigated for arson in hopes they won't have to pay the claim. My father-in-law's house caught on fire due to an electrical problem and the insurance company's paid "expert" tried to say that it was arson and that there was evidence of accelerants having been added to the fire. Later he changed his mind, but not before the old man nearly had a stroke. Supposedly he didn't realize that wood paneling burns faster than drywall...

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