Why renters insurance is a must
The number of renter-occupied homes has seen a consistent growth in recent years, with the U.S. homeownership rate at historically low levels. By the numbers, the share of Americans who own their homes was 65.3 percent in the third quarter of 2013, down 0.2 percentage points from the third quarter 2012, according to the latest data from the U.S. Census Bureau. Renter-occupied units made up 30.0 percent of the inventory of occupied homes in the third quarter.
Beside the economic considerations, demographic trends and a lack of available housing units have caused a spike in rental rates, with the median asking rent reaching $736 during the quarter.
In the current context, knowing the basics of renter’s insurance becomes a necessity and can act as leverage when trying to secure a home. Many landlords are now incorporating insurance clauses in the lease agreements that require tenants to buy renters insurance before signing the lease.
Much like homeowners’ insurance, rental insurance acts as a buffer against a wide array of mishaps that might cause the loss or destruction of personal property.
Coverage. By acquiring renter’s insurance, your possessions are protected in case of fire, theft, vandalism windstorm, lightning, and other unexpected events. Earthquake coverage is optional and available only in California.
Additionally, renters insurance provides coverage for medical expenses and personal liability claims. If a guest for example gets accidentally injured while on your property, the policy pays legal defense costs if you are taken to court. Everything from slip-and-fall injuries to cat scratches and dog bites can be covered without much ado.
Additional living expenses are also covered if your apartment or rental home becomes temporarily unavailable due to a covered loss, such as contamination, fire or smoke.
Assets. The value of your assets is very important as it will influence the amount of coverage you will want to purchase. It’s often a good idea to keep an inventory of your possessions, be it by taking photos, holding on to receipts of purchase, credit card statements, owner’s manuals, or making a video of your home.
Costs. Generally, the premium is relatively inexpensive as it only covers the value of the tenant’s personal possessions not the physical building. When it comes to selecting a policy type, you can choose between replacement cost or actual cash value coverage. Actual cash value policies are generally less expensive as they pay to replace your belongings minus a deduction for depreciation. The price of a replacement cost policy is about 10 percent more but will reimburse you for the loss of your possessions without accounting for depreciation up to the limit of your policy.