Q. My mom is nagging my wife and me about getting renter’s insurance. It doesn’t seem worth the cost but we’d like your opinion. When we buy a house we will get insurance, but it seems silly while renting. Won’t the landlord be responsible for any damage or repairs? Could you discuss the pros and cons of renter’s insurance?
A. That’s pretty easy. There are no real cons other than the cost and it is not very expensive. According to the Independent Insurance Agents and Brokers of America, the average cost of renter’s insurance with $30,000 of property coverage is less than $12 a month. Most homeowners have insurance because they have a mortgage and the lender will require that the home is insured. Even when the home is debt-free, most homeowners will continue to pay for insurance to protect themselves from damage due to fire, wind, theft, burglary, personal liability and other events. I don’t know why the majority of renters don’t have renter’s insurance. For anyone renting, if you don’t have renter’s insurance I encourage you to consider purchasing this type of insurance.
The landlord should have his or her own policy, which will typically cover damage to the building structure. Their policy may also cover any appliances that came with the unit when rented. The landlord’s policy won’t cover damage to your personal belongings. Think about the financial burden you’d face if you had to replace your clothes, furniture and electronics. A renter’s policy will help you repair or replace your belongings if they are damaged by a covered peril. Most policies will cover damage caused by fire, smoke, water, lightning and wind storms. Water damage would include a burst pipe or a rainstorm but not floodwaters. If needed, flood insurance is available for purchase through the U.S. government’s FloodSmart program (www.floodsmart.gov/floodsmart).
As with any insurance, you can add to the basic coverage for an additional cost. You may want to add coverage for theft or vandalism of your belongings. If you entertain and/or have children you should consider adding liability coverage. This coverage can protect you against financial uncertainty if someone becomes injured at your apartment and decides to hold you responsible for their medical bills. You can also add insurance that will cover your hotel bills and other living expenses if a covered loss makes your apartment uninhabitable. It would be your landlord’s problem to repair the structure, but where would you live? Some companies will also offer identity theft protection. Get quotes from a couple of companies with the coverage you prefer. The insurance company with whom you have your automobile insurance may be a good place to start. Many companies offer a discount if you buy more than one type of insurance policy.
You should thank your mom for “nagging” you.
Holly Nicholson is a certified financial planner in Raleigh. She cannot answer every question. Reach her at askholly.com or P.O. Box 97128, Raleigh, NC 27624