How to determine how much tenant insurance you need
It’s a problem every renter faces at one time or another: should I get tenant insurance, and, if so, how much do I need?
Chances are,you should get tenant insurance. While the structure of your apartment or rental home is covered by your landlord’s insurance, your own possessions – the things in your rental – are your responsibility. Tenant insurance can help you recover your losses in the event of damage or theft.
Luckily, figuring out how much insurance you need isn’t nearly as difficult as finding the perfect apartment to rent.
Value of your belongings
Contents insurance is what most people think of when they talk about tenant insurance. Contents insurance covers the belongings inside a renter’s apartment from theft or damage. Along with money to help replace contents in the event of a disaster or a burglary, tenant insurance can also help renters with hotel and moving costs if their apartment becomes unliveable.
To determine how much coverage you need, go around your apartment and make an itemized list of your belongings. Yes, this could take a long time, but it’s better to do it now than to try and remember everything you own later. Using this list, calculate the value of each item for a rough estimate of how much contents insurance coverage you need. This itemized list will be extremely useful in the event of a claim so keep it in a safe place, preferably in a safety deposit box or fire- and water-proof safe.
Next, decide if you want to insure your contents for actual value or replacement value. Actual value will cover the price of your damaged or stolen items minus the cost of their depreciation. Replacement value will cover the price of a new item. Because replacement value usually results in higher claims, replacement value coverage is more expensive than that of actual value coverage.
Liability coverage
The next thing you’ll have to think about when deciding how much tenant insurance your need is liability coverage. Liability coverage will protect you if someone is injured on your property or if you cause damage to another person’s property.
If a houseguest falls down your stairs and ends up in the hospital on an extended stay, you can make a claim with your tenant insurance policy. If your dishwasher breaks and causes water damage to the unit below, you will also be covered through your liability coverage.
Most liability policies cover a tenant for up to $1 million in damage. If you feel you need less or more coverage, tell your insurance broker to help find the right policy for you.
Ability to self-insure
When determining how much tenant insurance you need, take into account your ability to self-insure. Renters with large emergency funds or those who don’t own anything valuable might choose to forego contents insurance and self-insure. Renters with little savings want contents insurance to avoid having nothing in the event their belongings are damaged or stolen.
Luckily, tenant insurance is quite inexpensive. Depending on the deductible, policies can cost as little as a couple hundred dollars a year (or under $20 per month). With rates that low, it’s better to be safe and pay a little bit more than to find yourself underinsured because you underestimated how much insurance you need.