6 Myths About Renters Insurance

Between wildfires, flooding, earthquakes, hurricanes and tornados, homeowners fret about the insurance on their most expensive possession.

The same should go for renters. Just because they don’t own the property doesn’t mean they shouldn't be uninsured. A natural disaster, a kitchen fire or even a broken pipe in an adjacent apartment can wipe out everything they own that is in the property they are renting. That's why there's renters insurance.

More than 81 million Americans rent and, according to a survey conducted by the Independent Insurance Agents and Brokers of America done several years ago, two-thirds (over 50 million) of them don't have renters insurance. Why you might ask? Maybe they believe one of the following 6 myths:

Like homeowners insurance, it's expensive.
Renters insurance is much cheaper than homeowners insurance. You can typically get $30,000 of personal property coverage for $150 to $300 a year. And some estimates can be even lower. According to the Independent Insurance Agents and Brokers of America, the average cost is only $12 per month, or $144 per year, for $30,000 of property coverage and $100,000 of liability coverage.

As you can see this is a fraction of what homeowners pay. According to the website HomeInsurance.com, the average annual cost of homeowners coverage in the U.S. is $724.

You might be asking yourself “Why the difference?” The reason for this is because homeowners are insuring the cost of the building, while renters are just insuring the cost of the stuff inside. Renters are not responsible for the building in which they live; this is the responsibility of the landlord. They are most certainly responsible for their own belongings though.

My landlord has insurance, so I don't need it.
While your landlord probably has insurance to cover the building, your possessions aren't the landlord's problem and aren't covered by the landlord's policy. Another advantage to renters insurance is liability protection. Moving.com explains this in the following way, "When your best friend trips on a rug and breaks a leg, who wants to be surprised by a bill for what could amount to thousands of dollars?" Your policy not only covers damage to your stuff, it also protects you against damage to people should an accident occur inside the property you are renting.

My roommate has renters insurance, so I don't need it.
Some insurance policies cover roommates, but the majority don't. So you better ask your roommate to make sure that roommates are covered in their policy. Even then, there are a couple good reasons why you should have your own policy.

These policies have deductibles and limits on the dollars they pay out. Have you already talked about splitting the deductible? What if your stuff is more expensive than your roommate's stuff? The time to settle these important details is not the day after you've lost all your possessions. The sure-fire way to make sure you are covered is to get your own renters insurance policy. That way you know you are covered and you know the exact details of the policy.

I don't have enough stuff worth insuring.
Do you own a new laptop computer, an iPod or a flat-screen TV? When we think of valuables in a home, we often look no further than the furniture and major appliances. We tend to forget about all the electronic devices and even the little things that add up to a lot of cash. All of these hold some value and if damaged or stolen can cost a lot of money to replace. Your renters insurance would cover all of these possessions.

I'll never get hit with a natural disaster.
While some renters insurance doesn't typically cover losses from floods or earthquakes, it does protect you from lots of other things. As FreeAdvice.com points out: ‘A renter's policy (generally known as an HO-4 policy) typically provides policyholders with a fixed amount for all your possessions and provides coverage for specific "perils" such as: fire or lightning, windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, vandalism or malicious mischief, theft, damage by glass or safety-glazing material that is part of a building, volcanic eruption, falling objects, weight of ice, snow, or sleet, water-related damage from home utilities, and electrical surge damage.’

And if some of those events, volcanic eruption for example, don't seem likely, here's one that is: burglary. The U.S. Department of Justice says there was just less than 2.2 million burglaries in 2009, and "victims of burglary offenses suffered an estimated $4.6 billion in lost property. Overall the average dollar loss per burglary offense was $2,096." These figures are more than enough to warrant getting renters insurance.

It's too complicated.
No insurance is simple, that's true. Here are the basics of renters insurance and how you can save along the way:

  • Taking some off the top. The more risk you're willing to assume, the less your policy will cost. Choosing a $500 deductible over a $250 deductible can save 10% to 12%, and a $1,000 deductible can save even more.
  • Abbreviating the options. AVC stands for Actual Value Coverage. That means you get paid for the depreciated value of the loss. For instance, that laptop you bought for $1,000 might be worth $500 now, and that's all you're going to get for it. RVC stands for Replacement Value Coverage. This means you'll get enough money to buy a new laptop just like it. Normally replacement cost insurance costs about 25% more than the actual cash value policy, but if you can afford it, it's worth the larger payment.
  • Location, location, location. If you live in a high-crime area, expect your premiums to be higher. There are however ways for you to save. If you install a home alarm or add a deadbolt to the front door, these can help lower the cost of your insurance.
  • Membership has its privileges. Being a member of a credit union, AAA, or other organization may means that you can avail of discounts on your insurance, so be sure to ask.
  • Give up smoking. Many accidental fires are caused by smoking. Discounts are sometimes given if you've kicked the habit or never smoked at all. 
  • Come highly rated. Your credit rating can have a strong effect, both positive and negative on the cost of your insurance policy. The lower your credit score, the higher your premiums will be.