Renters insurance is an often-forgotten coverage that is surprisingly valuable to both tenants and landlords alike. Did you know that, according to the U.S. Census Bureau, rented units make up approximately 36.5 percent of occupied housing? Furthermore, a poll conducted in 2014 by the Insurance Information Institute found that only 37 percent of tenants have renters insurance – compared to 95 percent of insured homeowners. The majority of renters are putting their valuables and financial standing at risk when they could be covered for very low cost.
At the same time, landlords who do not emphasize the importance of renters insurance to their tenants (including it as a requirement in the lease, for example), may unnecessarily put themselves at risk for damage done by their tenants or injuries that occur on the property. Let’s dispel the myths and highlight the true value of this powerful little policy.
1. The landlord’s insurance policy covering the property will also cover the tenant’s possessions.
FALSE // Property insurance will cover damages to the building itself and bodily injuries due to negligence of the property owner. It does not cover the replacement of the renter’s furniture, clothing, electronics, etc. However, renters insurance does cover a tenant’s belongings.
2. Renters insurance is expensive.
FALSE // Renters insurance is actually very affordable. Policies typically cost between $15 and $30 per month depending upon the coverage limits, the National Association of Insurance Commissioners reports. Tenants can typically get multiline discounts when they add a renters policy to their auto coverage.
3. Most renters don’t own items expensive enough to warrant coverage.
FALSE // Costs of everyday items such as furniture, clothing and appliances can add up very quickly if they are destroyed by a fire and need to be replaced at the same time. In addition, the majority of people in the United States typically own a TV, computer or laptop, and cellphone. It is very easy for the average person to own at least $20,000 worth of “stuff.” Plus, renters insurance can protect the tenant’s belongings if a theft occurs away from home. Many policies also protect against stolen or forged checks or stolen credit cards.
4. Renters insurance only covers a tenant’s possessions.
FALSE // Renters insurance covers much more than just personal property. Most policies also include up to $100,000 in liability coverage. That $100,000 can protect tenants if they accidentally damage someone else’s property or are responsible for another person’s injuries. As the security deposit may not be enough to cover the cost of a larger loss, this liability coverage can give landlords an added layer of protection if their renter unintentionally damages the property.
Common risks for rental properties also include dog bites and injuries to guests. If the tenant is held liable for an incident, renters insurance can help pay medical bills and protect the landlord from excessive lawsuits. Instead of leaning on the landlord’s policy as the primary coverage, the tenant’s policy may be able to cover the damages, acting as a first line of defense.
WHAT DOES A RENTERS INSURANCE POLICY ACTUALLY COVER?
- Main Coverages: Theft, fire and smoke, vandalism, water damage and liability.
- Personal Property: May have limits based on a single item or a group of items. i.e. $1,000 limit per jewelry item or total limit of $1,000 for all jewelry.
- Scheduling Items: Renters can do this if they need to increase limits above the standard.
- Typical Deductibles: $500; $1,000; $1,500; $2,500; $5,000. (The higher the deductible, the lower the premium.)
- Additional Living Expense: Reimburses the tenant for reasonable increases in living expenses if the damage makes the property uninhabitable. This may include the costs of a hotel, food and other expenses. Many landlords end up paying out-of-pocket for this expense when a renter doesn’t have coverage.
- Guest Medical Protection: Helps pay for medical care for a guest injured in an accident at the property. Expenses can include X-rays, surgery and dental work, to name a few.
- Extended Coverages: Purchased additionally, extended coverages increase limits for items like jewelry, watches and furs. Availability varies by insurer.
- Scheduled Personal Property: Increases limits for specified items such as cameras, antiques, recreational equipment and the like.
- Identity Theft Restoration: Protects a tenant against the costs of legal work, phone calls and lost wages due to identity theft.
- Business Property: Covers items that a renter keeps in his or her home as a business sample.
- Exclusions: Damage the tenants do to their own property or belongings. Flood, earthquake and sewer back-up. Some policies may have additional exclusions.
NEED AN OUTLET FOR RENTERS INSURANCE?
As I mentioned previously, it is very easy for a tenant to obtain renters insurance. One of the most economical ways to go about it is to add the coverage to an existing auto policy. If that option is not available, one of our partners, National Real Estate Insurance Group (NREIG) has an outlet for writing renters insurance. The coverage is underwritten by Safeco and is available in all states except DC, DE, HI, MA, ME, NJ & RI. To obtain coverage, tenants can call Safeco directly at 888-451-8295.
For landlords having difficulty obtaining proof of renters insurance from their tenants, NREIG has a new product called the Tenant Protector Plan (TPP). This coverage can act as a “first line of defense” to protect the property owner if the tenant accidentally damages the property. To be clear, it is not renters insurance, but its similar coverages offer a layer of liability up to $50,000 per occurrence and property coverage up to $10,000. The coverage is underwritten by Lloyd’s of London and the monthly cost is typically less than $10 per unit. More information is available at www.nreinsurance.com.
BENEFITS FOR TENANTS AND LANDLORDS ALIKE
As you can see, there really is no reason for a tenant not to have renters insurance. Renters who purchase this specialized coverage gain valuable protection for their possessions and financial stability. At the same time, landlords gain an additional layer of protection for themselves and the property. Renters insurance is mutually beneficial and should be included on any tenant or landlord’s “must-do” checklist when renting.