The number of renters is on the rise, according to the Pew Research Center, increasing from 31.2% in 2006 to 36.6% in 2016. Homebuying is a future goal for many of those first time renters, but for now, renting provides flexibility, convenience and less responsibility—especially for millennials. Although some renters hold off on homeownership to save on costs, there’s one cost that shouldn’t be skipped: renters insurance.
According to the Insurance Information Institute, only 46% of renters carry insurance, leaving the majority without any protection. Here’s why you need this type of coverage and what to know.
What to know about Insurance for First Time Renters
As a homeowner, you would be required to insure your house—why should renting be any different? In most cases, renters insurance is a very cost-effective way to protect your belongings and finances, and it’s typically cheaper than homeowners insurance.
In Texas, for example, renters insurance costs $431 on average per year, while homeowners insurance costs $2,355 a year on average. Skipping out on insurance can leave renters with no way to replace their belongings after a covered incident or paying for legal fees and third-party medical expenses.
Renter’s Insurance: Every Renter Needs It
Renters often think they don’t need insurance because they don’t own the house or apartment building. The truth is, renters still face risks and need insurance to protect their financial interests. Renters go without insurance far too often and will be left to pay claims out of pocket if an unexpected incident occurs.
Most individuals understand that homeowners insurance pays for costs associated with liability or to repair a home after covered incidents occur, such as a fire or water damage. A renters insurance policy offers similar benefits for individuals who rent.
- Property protection: Renters insurance provides coverage to replace belongings that have been stolen or damaged in a covered incident up to the policy limits.
- Personal liability: Personal liability coverage protects you in the event you are held responsible for someone else’s injury or damage to their property. Common claims include dog bites or injuries that cause medical attention and loss of income.
- Additional living expenses: After a covered incident occurs, your home may become uninhabitable and you may need to relocate. Renter’s insurance includes coverage for additional expenses for temporary relocation.
- Medical expenses: If one of your guests falls and injures themselves, you are responsible for their medical bills. Renters insurance includes medical expense coverage to pay for the injured party’s medical costs up to a specific limit on the policy.
3 Things You Didn’t Know About Renters Insurance
It is important for renters to understand how insurance protects them.
- Roommates’ belongings: Renters insurance provides coverage only for the named policyholder. Roommates will need to purchase their own insurance to get protection.
- Coverage for items while you travel: Your belongings may be covered when you’re traveling or otherwise away from home. If items are stolen from your vehicle or hotel room, renters insurance also pays to replace these items.
- Borrowed items: Renters insurance covers items in your possession, which extends to property that you rent or borrow from another individual.
Currently, 54% of renters risk paying costs out of pocket for theft or property damage. Even if you have enough in savings to buy new things, you should also consider the personal liability risks you face when you have guests over. Renters insurance protects you against all of these risks and the devastating impact on your finances.