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Do I Need Renters Insurance?

What does renters insurance cover?

Insurance has existed for centuries. In fact, the first American insurance company, the Philadelphia Contributionship, was co-founded by Benjamin Franklin in 1752! Yet, according to the Independent Insurance Agents & Brokers of America, Inc. (IIABA®), nearly two-thirds of renters do not have renters insurance.
You never need insurance — until you need it. Without renters insurance, you put your savings at risk and might find yourself with additional debt. Rather than making monthly debt payments, it’s wise to pay smaller insurance payments.
Understandably, while renting, many people are often trying to save for a down payment to buy a house. No one needs an extra expense while they are trying to save for a new home. So, while you may not own real estate, you do own personal property: electronics, furniture, jewelry, clothing/shoes, firearms, small kitchen appliances, collectibles, etc. These all add up quickly once you take inventory and start estimating replacement costs. It’s recommended that you take photos of your larger value items. This will give you an idea of how much coverage you should consider.
The IIABA also points out that the value of your personal belongings is most likely much more than the value of your car. These personal valuables are not covered by your landlord’s homeowners policy. 
Any basic renters insurance policy should include the following three coverages:

1. Loss or theft of personal belongings: Know which type to choose

Insurers offer two types of coverage for your personal belongings: replacement coverage and actual cash value coverage. Replacement policies provide coverage for the cost to replace an item today. For example, a new Apple iPhone 12 today might cost you around $850. The actual cash value of your Apple iPhone X with depreciation, however, might only be around $400. Make sure you know what type of coverage your policy offers.

2. Liability: What if it’s your fault?  

Renters insurance should also include some amount of liability insurance. If you, or someone visiting you, accidentally causes damage to the property you’re renting, you have coverage. Likewise, if someone is injured on the property and you are responsible, your policy will provide some coverage for medical and legal expenses. For instance, if the mail carrier trips and falls over your child’s bike and breaks an arm, you’re covered.

3. Living expenses: If you have to move

If your rental becomes uninhabitable due to damage, the living expenses part of a policy provides coverage toward the cost to temporarily move and live in a hotel, if necessary.

How much does renters insurance cost?

As with any other insurance, the cost of your policy is determined by many factors:
  • The location in which you live (If you live in a flood plain or an area that is prone to earthquakes, hurricanes, tornados, or vandalism, your policy will be more expensive and may even require separate coverage.)
  • The amount of coverages
  • The deductible you are willing to/able to pay
  • The history of claims you have filed in the past
  • Your credit score
Most average policies will cost anywhere from $10 to $30 per month. If you have other insurance policies, such as auto insurance, with the same provider or are willing to combine policies with them, you will probably qualify for a discounted rate. 
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