Renters Insurance – your “stuff” is actually the frosting…
A lot of people that I talk to think that the purpose of renters insurance is to protect their “stuff” in case they have a fire or a break in.
They think that because they don’t have a lot of “stuff” (ie- furniture, clothes, electronics, etc) that they don’t really need renters insurance. They think that it is a waste of money- because if they have a fire or something they will just buy new stuff to replace the junky stuff they have in their apartment now.
But the main purpose is renters insurance isn’t really to cover your stuff at all. Consider that the frosting on the cake. You get coverage for your stuff as an extra.
Renters insurance is actually your liability policy. And this is something that every renter- whether you actually PAY rent or not- regardless of how much “stuff” you actually have- needs.
What is liability?
Liability is when you cause damage to the property you are renting. The most common example of this is if you cause a fire or water damage to your apartment or home.
Your landlords insurance will cover the damage (that’s why they have landlords insurance)- but then their insurance company will come after YOU for the amount of the damages. Two things will happen. If you have renters insurance- you will give them your policy information and your renters insurance will pay out from your liability coverage (up to the limits). If you do not have renters insurance, you will end up having to pay for your damages out of pocket. They can garnish your wages- for life if necessary.
Not really sure what that really means in real life?
My friend was telling me a story the other day about her son’s girlfriend who was renting an upper level of a duplex near her college campus. These girls went to Florida for spring break and they turned the heat down thinking they would save money on their utilities. Well… the temperature got really, really cold (it IS Wisconsin, after all!) and they had a pipe freeze and burst. This shot water all over their apartment and down to the unit below them.
I’m not sure exactly the amount of monetary damages there were- but I imagine this was quite costly- and I was told that luckily the girlfriend had renters insurance with $100,000 worth of liability coverage- which came in handy when the landlord’s insurance company came after them.
Another example is one of our customers who called us a few weeks ago because they had a dog that had a bad day at doggie daycare. This customer was frantic because her dog had bitten another dog and the other dog had to have some stitches and other medical treatment. Because the customer had a $250 deductible- anything over that deductible is something that the liability insurance policy could pay for. This would also include if your animals had a temper tantrum towards a human (we’ve had dog bite claims towards delivery drivers too!) or if your animal trips a human, like at the dog park, and causes severe injury and subsequent medical care.
Lastly- every few months you’ll see in the news an apartment fire- these usually start in one unit and all of a sudden the adjacent unit is on fire too (or the one above or below it). When that happens, several other units are also damaged by smoke and water. If you were to cause a small fire in your own kitchen, it wouldn’t take much for the monetary damage to add up very quickly. Again- your landlord’s insurance would take care of the issue- but their insurance company would subrogate (or come back to you) and try to get the money from you. If you don’t have it- they will simply take you to court and you’ll spend the rest of your life with garnished wages over your head. Renter’s insurance- with a very inexpensive price tag of (usually) under $20/month will give you at least $100,000 of liability insurance.
Additional Living Expenses Coverage
Remember that example I gave you about the girls and the frozen pipe? The nice thing about renters insurance is that it ALSO includes something called additional living expense coverage. This means that your insurance policy will provide money to rent you another place to live (and help pay for additional food expenses if you incur them) if you can’t live in your place because it is being fixed due to a loss. Since these girls couldn’t live in their duplex while it was being repaired- they were put up in an extended stay hotel – for free– because of their insurance policy.
What other coverages are on a Renters Policy?
Now that you understand that a renter’s insurance policy is mostly about providing you with liability coverage, let’s talk about what else you get with your policy.
Coverage for your “stuff”
Additional living expense coverage
Guest Medical protection- this is protection in case you have a friend/family member over and they injure themselves. It doesn’t matter if it was negligence of not- your policy will provide some coverage so that you can make sure they get medical attention (go to urgent care/ER). Policies usually start with $1,000 / incident / person, but you can increase the coverage on this.
An example of a scenario for this coverage would be having a Memorial Day cookout/bonfire and someone trips over the hot lid of the fire-pit and burns their arm. They go to the ER to get it dressed and medicated, etc. You would have $1,000 to help pay their deductibles/co-pays, etc.
You can add optional coverages to your renter’s insurance policy to make it work for you. If you have a wedding ring or engagement ring that is worth more than $1,000- than you should talk to your trusted advisor about scheduling your ring so it is covered for theft/loss/mysterious disappearance. You can add things like identity theft coverage or coverage for expensive musical instruments or cameras. The important things is just to have that conversation with your agent.
Bottom line- If you are over 18 and live in a home, apartment, or condo that you do not own- you need to have a renters policy- because if you cause any sort of damages to that living space, you can be held liable for those damages. A renters insurance policy is very affordable and includes many coverages that can help you out in a ton of situations that you probably haven’t even thought of.
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