Renter’s insurance protects tenants

Question: I’ve heard of renter’s insurance, but do I really need it? Doesn’t the landlord’s policy cover most misfortunes?

Answer: No, the landlord’s insurance doesn’t the cover the contents of your apartment. Yours is a common misconception, and it’s probably part of the reason why only about a quarter of renters have insurance.

According to Jeanne Salvatore of the Insurance Information Institute in New York, some other common misconceptions about renter’s insurance are that it’s expensive and that the contents of a modest apartment aren’t worth insuring. Also, because renter’s insurance, unlike homeowner and car insurance, isn’t required by law or by lenders, many tenants don’t bother.

“In particular, younger renters assume that because their apartment is fairly bare-bones, they don’t need insurance,” Salvatore said.

Renter’s insurance costs about $150 a year on average nationwide (more in states prone to violent weather) for about $30,000 worth of property coverage. Apart from fire, renter’s insurance typically covers theft, vandalism, water damage and weather damage.Policies usually have liability coverage, which insures against medical claims by guests and visitors injured in the apartment.

There are two main types of renter’s insurance.

One is the actual cash value policy, which replaces the value of the item at the time it was lost. In other words, a television bought for $300 and destroyed five years later by a burst pipe would be valued at much less, maybe $100.

The other kind of policy, replacement cost, would give the policyholder the $300 it would take to replace the TV with a new one. It costs perhaps 10% more than an actual cash value plan and represents a much better value, according to Salvatore.