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When somebody buys a home,
they take out a homeowner’s insurance policy as a matter of course. And yet at
least half of all renters remain uninsured. That’s not a good thing.
Some believe that their
landlord’s insurance provides coverage, or that individual renter’s insurance
is too expensive. But the obstacles are more imagined than real, and remaining
uninsured comes with the real risk of losing all your stuff.
What a landlord insures
If the sink starts to leak in
your apartment, you call the landlord. That’s one of the biggest advantages of
renting instead of owning—you don’t have to worry about home repairs. But
landlords are primarily concerned with protecting their investment. They take
out insurance on their property, not yours.
A landlord insurance policy will cover damage
to the building due to fires, storms, and vandalism. It even protects against
you, the renter, in the event you damage the building or sue the landlord for
an injury you suffered at home (on their property), or for damage to your own
property (for example, if a leak from upstairs ruins your couch). The insurance
will also cover the landlord’s lost income if that upstairs flood makes your
apartment uninhabitable. But you can bet that money will not be used to pay
your rent somewhere else while the landlord replaces your ceiling.
What renters need insurance for
That’s one of the ways in
which renter’s insurance comes in handy. Some
policies will cover your expenses if you need to stay in a hotel while repairs
are done to your dwelling, or help cover moving costs if your rental unit
becomes uninhabitable.
Its primary purpose, however,
is to cover your property, which, if you are a renter, means your possessions.
If your rental home is burglarized, or damaged by fire, storm, or vandalism,
renter’s insurance will cover your loss. You can even get protection against
lawsuits if someone is injured while they are at your home (though that kind of
coverage overlaps with landlord insurance, so establishing liability in these
instances can quickly become a legal matter).
Obstacles to renter’s insurance
A few renters might be unaware
that renter’s insurance exists, but in most cases, renters choose to remain
uninsured either because they think insurance will be too expensive or because
they think they don’t have much to lose.
Concern for cost is natural.
Renters in markets around the country are feeling the squeeze. Seventy percent
of them think their rent is too high. In markets like San Francisco, that number jumps to 90
percent. When you’re struggling to make rent, it’s hard to entertain the idea
of paying for anything that isn’t necessary. But if money is tight, you really
can’t afford to cover your losses if your apartment gets robbed.
Also, as luck would have it,
renters’ insurance is actually pretty cheap, comparatively speaking. Estimates
vary, but most people can find a basic policy for under $200 a year. If you have a
few high value items, like your grandmother’s
diamonds or an irreplaceable vinyl collection, you might pay for a special
policy (called a rider or a floater) that gives extra protection for the loss
of those specific items.
But even if you don’t have any
priceless heirlooms, you might be surprised at how much you have. Most experts
recommend taking inventory of your apartment before you buy insurance. This
will help you buy the right amount of insurance now, and also help you document
your losses if you ever need to file a claim. On average, renters find they
need between $20,000 and $30,000 of coverage.
What about my roommates? Are they covered too?
Renting and roommates are
common companions, especially for millennials and especially in high-rent
areas. Overall, nearly 8 percent of all Americans have roommates, while nearly
a third of millennials in San Francisco do. So if you share an apartment,
should you also share insurance?
In general, the answer is “no.” The fluidity of a
roommate situation increases the risks of combining finances. It’s more than
just another shared bill. If either of you makes a claim on a shared insurance
policy, both of you are likely to face higher premiums in the future—even if
you no longer share a policy. So unless your roommate is also your long-term
partner or a close friend who has shared housing through multiple moves with
you, it’s better to keep your finances as separated as possible.
On the other hand, shared insurance can sometimes be cheaper
than maintaining separate policies. If the savings are significant, it may be
worth the risk. That risk can be minimized by
getting things in writing – something that’s a good idea anyway.
After all, if newlyweds can
agree to the terms of a prenuptial agreement, roommates should have no problem
with a rental agreement.
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