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Why you need renters insurance — yet few renters have it

There are a lot of reasons why you need renters insurance. Yet, there seems to be a strange disconnect between how many people need it and how many actually have it.

Consider: 95 percent of homeowners have homeowners insurance, yet only 40 percent of renters have renters insurance, according to a 2015 Insurance Information Institute poll.

See also: Millennials lack renters insurance and believe it costs over $1,000

What’s more, the 2010 Census showed that renters outnumber homeowners in some of the country’s largest cities, including New York, where renters occupy 69 percent of households. 

Translation: There are a lot of uninsured renters out there.

One reason why you need renters insurance: Financial protection

Despite this disparity, experienced renters and insurance experts alike agree that renters insurance is essential. 

“Renters insurance is one of those things that I can’t stress enough for people renting apartments or houses,” says David Meltzer, owner of East Insurance Group, which specializes in property insurance. “Many people think renters insurance is too expensive or unnecessary, but they’re wrong. Renters insurance is affordable and, like all insurance, is important because it protects you in cases where you can’t afford to take a hit.”

For instance, Meltzer recalls how an apartment occupied by one of his clients recently went up in flames on an early Saturday morning. According to Meltzer “pretty much everything” was destroyed, including paintings, family portraits and numerous other possessions. The damages totaled more than $350,000.

“I’m sure my client didn’t have $350,000 just lying around. But that didn’t matter. Because he had renter’s insurance everything was covered,” says Meltzer. “Renters insurance is a small price to pay for the peace of mind that comes from knowing your possessions will be protected.”

What is renters insurance?

Renters insurance protects renters from losses brought on by unexpected events like theft, fire or water damage. A renter’s insurance policy will also cover injuries to visitors of the property and typically pays for any additional living expenses incurred by having to temporarily vacate the rental property.

Most leases stipulate that landlords are not responsible for the replacement costs of a tenant’s possessions or for medical costs stemming from injuries, which means renters insurance is often the only recourse in the event of a financial loss.

“Renters insurance covers the renter, not the owner of the property,” says David Reiss, law professor and research director at Brooklyn Law School’s Center for Urban Business Entrepreneurship. “This is important because the owner of the property may not be liable for everything that happens on his or her property. So if the renter’s possessions get destroyed or stolen — or if the renter is sued because someone gets hurt in the apartment — renters insurance can cover the losses and pay the renter’s legal costs if the injured person sues.”

Consider the case of Kaitlin Bitting, who purchased a renters insurance policy “on a whim.” Less than six months later the pizza place on the ground floor of her Philadelphia apartment building caught fire, causing damage to her unit and others in the building.

“Thankfully my insurance covered everything — the replacement of smoke damaged items, the cleaning of all salvageable items like electronics and all my clothing, and the packing, storage and moving of the entire contents of my apartment, since I wasn’t allowed back on the premises,” says Bitting. “Since then I’ve told all my renter friends that it’s worth every penny.”

Renters and their dog

How much does renters insurance cost?

The short answer: Not much.

The average annual premium for a renters insurance policy is $187 or less than $16 a month, according to the National Association of Insurance Commissioners.

“Most tenants don’t have renters insurance because they simply don’t have all of the information,” says Donovan Reese, a broker with the property management company Renters Warehouse. “They think they’re saving money. Whether you’re renting an apartment, a condo or a house, you can get coverage for as little as $10 to $20 dollars a month. We have seen firsthand how not having renters insurance can devastate both renters and landlords. They are always sorry they didn’t have it.”

Most states do not mandate renters insurance, but landlords can require it as part of the lease.

“It’s a safety measure, more than anything, and it can give both renters and landlords peace of mind,” Reese says.

How much coverage do you need?

Every renters insurance policy will be tailored to the needs of the tenant, so it’s important to figure out how much coverage you need.

Renters should add up the replacement cost of all personal property and possessions, according to Washington, D.C.-based attorney Benjamin Grosz. This should provide a ballpark for how much coverage you need, although it might be smart to discuss the specifics with an insurance agent.

“Everyone has a different quantity — and quality — of stuff,” Grosz says.

It’s important to remember that many renters insurance policies limit coverage amounts for certain items like jewelry or valuable collections, Grosz adds.

“If you have an engagement ring or valuable stamp collection, you may need a special rider or endorsement,” he says. “Read your insurance policy carefully to understand and ask your insurance agent if you have questions.”

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