Why Renters Need Insurance

Homeowners procure homeowners insurance to protect themselves from hazards that damage their home. Renters should do the same through property and liability insurance policies. However, according to JD Power, 46% of renters do not. Additionally, according to a Harris Interactive Poll conducted on behalf of Nationwide Insurance, 56% of millennials who rent do not carry renter’s insurance.

There are two main reasons why individuals who rent do not carry renters’ insurance. The first is price. Many renters believe that they can’t afford to insure their belongings. They would be pelase to know that renter’s insurance is actually not that expensive and provides a substantial amount of protection for little money (as little as 50 cents a day).

The second reason is that many people assume that their landlord’s insurance will cover their personal property. But the landlord’s policy only covers the building and the property of the landlord. The landlord, moreover, has no insurable interest in the tenant’s personal property. The other thing that tenants miss when they provide this answer is the fact that there are many more risks other than property damage or loss when renting an apartment. This article will examine the risks that a renter faces and that are covered by renter’s insurance.

What Renters’ Insurance Covers

As mentioned earlier, the first thing that comes to mind when individuals think of renter’s insurance is coverage for the personal property of the insured. Many people underestimate the amount of personal property they have in their homes and because of this find the cost of replacing their possessions significantly higher than expected. Renters’ insurance covers property damage in one of two ways: property and liability. Most policies afford coverage for a specified set of perils. They are

• Fire or lightning
• Windstorm or hail
• Explosion
• Riot or civil commotion
• Aircraft
• Vehicles
• Smoke
• Vandalism or malicious mischief
• Theft
• Falling objects
• Weight of ice, snow, or sleet
• Accidental discharge of water (learn what is covered for homeowners in 5 Water Damage Home Insurance Scenarios)

In some cases, the policy can be endorsed to cover all risks of direct physical loss except those that are excluded by the policy and subject to limitations for certain items.

In addition to personal property, there is also additional coverage for:

• Debris removal
• Reasonable repairs to protect covered property
• Trees, shrubs, or plants
• Any fire department service charge
• Property removed as the result of a loss
• Credit or debit card fraud, forged checks, and the receipt of counterfeit money

This last coverage has an additional component: should an insured be sued for an incident that triggered the coverage, the insurer will provide an attorney and pay the expense to defend the insured (for more, see Insurance and Lawsuits: What Happens When You are Sued).

Other coverage includes:

• Loss assessments by a homeowners association
• Collapse
• Glass that is part of a tenant’s improvements or betterments
• Building alterations and additions made by the insured
• Expenses to comply with ordinances or laws when repairing an addition or alteration made by the insured
• Grave markers that are not on the premises
• Refrigerated property
• Inflation coverage

There is also a provision that provides for a reward for information leading to the arrest and conviction of an arsonist.

Insuring Renters’ Risks and Expenses

Another risk that a tenant takes on when they rent a home is the risk that the home will be rendered uninhabitable should a loss occur. In that event, the renter would need to find an alternative place to live until repairs are made to make the building habitable again. Additionally, there is the risk of a governmental authority requiring that a tenant leave due to a loss occurring in a neighboring building.

In either case, the tenant will incur additional expenses related to being displaced temporarily. Renters’ insurance covers the additional expenses required to maintain one’s standard of living while being displaced. These expenses include such things as accommodations while the building is being repaired, storage expenses for property, and meals out that would not have happened had the loss not occurred.

Renters also encounter situations where others allege that an occurrence resulting in bodily injury or property damage is the renter’s responsibility. Renters’ insurance provides coverage for these occurrences.

Renters are not exempt from being sued because an aggrieved party believes the renter is responsible for bodily injury or property damage. An example of bodily injury for which a renter may be liable would be when the renter accidentally collides into another person because they did not see them and the person is injured as a result. An example of property damage in the same vein would be if the renter threw a baseball and damaged a window on another property. Renters’ insurance affords an indemnification for these kinds of losses. In addition, the policy can be endorsed to provide coverage for personal injury.

The indemnification for a loss, however, may not be the most important part of this coverage. Liability coverage also includes a defense provided for on your behalf with the costs borne by the insurer. This is done even if the claim made against the insured is groundless. Given the fact that the costs of an attorney and his or her staff to defend the claim can be very high, the provision of a defense by the insurer may be more valuable than the provision of an indemnification.

Should an accident resulting in bodily injury occur to a guest in the insured’s home (tripping over a rug, for instance), should the insured do something that would injure another person, or should the insured’s pet injure another person, that person would be paid for reasonable and necessary medical expenses up to the policy limit. This coverage is afforded without regard to fault, and the intent is to avoid further legal action related to the accident.

As you can see, just because a renter doesn’t own a home doesn’t mean they aren’t exposed to a variety of risks. The costly risks of property loss, loss of use of property, and liability are all addressed inexpensively through a renter’s insurance policy.