Monday, January 13, 2014

Renters insurance: Do you really need it?

Sometimes it's hard to know what's smart to insure and what isn't. As Lisa reminded us in this great post, insure only what you cannot afford to lose. All of the stuff in your apartment collectively would probably fall into that category. Can you imagine a fire destroying your apartment and having to replace everything? That's why one of the kinds of insurance we recommend getting is renters insurance (if you're renting, of course. If you own your own home then you need homeowners' insurance, but that's a story for another post).

What is it?  Your landlords are responsible for insuring the actual residential property against fire, vandalism, etc. Your stuff is your responsibility (that only seems fair, right?), and you can cover this through renters insurance.
According to Allstate (which I recognize is not the world's most unbiased source, but what they say makes sense to me), your policy should include some amount of each of the following types of coverage:
  1. Personal Property Coverage: This is coverage for your property if it is stolen or destroyed in a covered type of disaster (like fire or a storm). Since it would be a significant hardship for most of us to replace all of our belongings, this is critical. Make sure to pay attention to if the policy is "actual cash value coverage" or "replacement cost coverage." Actual cash value is what you could sell your belonging for in its condition right before destruction (like on eBay or on Craigslist). Replacement cost is what it would cost to buy that item new. Big difference, and the policies are priced accordingly.
  2. Liability Coverage:  If a visitor injures themselves in your home, your renters insurance could pay the legal and medical bills.
  3. Additional Living Expenses: If you're home was destroyed to the point where you had to move out, coverage for additional living expenses would pay for hotel/restaurant bills temporarily (usually just to the extent that it is beyond your normal living expenses). 
How much do I need? Let's break this down for each of the above types of coverage.
  1. Personal Property Coverage: It's probably helpful to do this little exercise to get an idea for how much your stuff is work. Adding up the worth of your possessions by category can help you realize how much your "junk" would actually cost to replace! 
  2. Liability Coverage: Typically, $100,000 is the recommended amount.
  3. Additional Living Expenses: The types of coverage varies from policy to policy (for example, some may limit your coverage to a certain amount of time, others to a certain dollar amount). This article brings up the good point that the insurance company will probably require documentation of both your normal and temporary living expenses to calculate the difference, so all the more reason to budget and track your spending! 
How much is it? This happens to be a pretty reasonably priced thing to get. For example, if you check out this Ask Dave link, for coverage of $20,000-$25,000 or so, it should only run you about $8-$10/month, which is about what we pay for Netflix every month. If you submit your contact information online for a quote, I would prepare to be contacted.

Where do I get it? There are many different companies offering renters insurance. Our policy is through Progressive since they also cover our cars and we can get a discount on our car insurance by having multiple policies with them. Below are some links to some of the larger companies (disclaimer: I've only used Progressive and never had to make a claim).
Now what? Figure out how much renters insurance you need (try using the above calculator), get a couple of quotes from companies you feel good about (read some reviews-- just google the company + renters insurance + reviews and see what comes up), work it into your budget, and buy the policy! They will probably ask you some questions on the phone and have you sign some paperwork.

A reminder: This post is an overview to get you acquainted with the basics. Before pulling the trigger on any insurance policy (or making any significant financial decisions), we recommend doing more research on your own. The links below are a great place to start.

"How Much Renters Insurance Do You Need?" by Dave Ramsey.
"Personal Property Coverage" Allstate Insurance Company
"Renters Insurance Calculator" Peak Insurance Advisors 2013
"What Does Renters Insurance Cover?" Allstate Insurance Company, January 2013.

Tell us-- What other kinds of insurance do you want to hear about more in-depth?

Share-- Have you thought about getting renters insurance before?


  1. We have a renter's (and car) insurance policy through Amica. They keep trying to get us to take out life insurance with them for the trifecta of multi-line discounts, but I haven't gotten around to getting it since my job benefits expired...


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