Landlords generally require tenants to take out rental insurance to cover any unforeseen losses. Nevertheless, the big question is, how much renter’s insurance coverage should a landlord require for new tenants? In this article, we aim to answer that question, while providing additional insights into this topic. In general, a good policy should cover at least 80% of the renter’s total possessions. For example, if the tenant values their belongings at $10,000, their policy should at least payout $8,000. However, the biggest mistake most renters make is getting the cheapest policy just to fulfill the lease requirements. Unfortunately, the cheapest policy may not offer sufficient coverage. Renter’s insurance can offer coverage ranging from $5,000 to $500,000. Ultimately, the choice of coverage depends on the valuation of the renter’s items. Depending on the policy, the renter may need to prove the value of their property or estimate how much it would take to replace their property. This is why the cheapest policies may not offer sufficient coverage when used to recover damaged or stolen property.
Why Should Landlords Require Renter’s Insurance?
Tenants should be aware that a landlord’s insurance policy only covers the property itself against perils stated on the policy. However, the tenant’s personal belongings are never covered by a landlord’s policy. Moreover, tenants may incur losses derived from unforeseen events such as natural disasters. In such cases, renter’s insurance can cover most or all of the tenant’s possessions. Landlords should be adamant about their tenants getting coverage especially if the rental property is located in an area with high crime or prone to natural disasters. For example, a typical renter’s insurance does not cover property loss in case of wildfires. So, both landlords and tenants may seek to get coverage for this specific type of peril. Nevertheless, some insurance carriers may refuse to insure against these specific perils.
How Does Renter’s Insurance Pay Out?
There are two main ways that a renter’s insurance pays out to a policyholder. First, most policies payout on a cash value basis. These are the cheapest and easiest policies to get. They have a specific monthly payment and payout a lump sum when used. For example, a $15 a month policy would normally cover up to $5,000 in property loss or damage. It would then be up to the tenant to cover any additional costs. Second, some policies payout on a replacement value basis. In this case, the tenant would need to provide purchase receipts for the purchase price of the items on the policy. The insurance carrier would then reimburse the policyholder for the cost of replacing the items. These policies are more expensive and require much more legwork to obtain.
What Items Do Renters Need To Insure?
Renter’s insurance mainly covers personal belongings. Here is a list of items to consider:
• Kitchen appliances
• Dining room table and chairs
• Bathroom accessories and appliances
• Living room furniture
• Consumer electronics
• Bedroom furniture
• Washing machines and dryers
Generally, musical instruments, collectables, and sports equipment is not covered by a renter’s policy. These items need to be added to the policy either at the beginning or after the policy is in effect. In some cases, renters may need an additional policy to cover memorabilia or antiques. For these items, a professional appraisal may be required. Otherwise, the insurance carrier may refuse to pay out the item’s estimated market value. Of course, it will cost more to include these items in a standard renter’s policy. Thus, it might be a better idea to take out a specific policy covering rare collectables, memorabilia, and antiques.
• Kitchen appliances
• Dining room table and chairs
• Bathroom accessories and appliances
• Living room furniture
• Consumer electronics
• Bedroom furniture
• Washing machines and dryers
Generally, musical instruments, collectables, and sports equipment is not covered by a renter’s policy. These items need to be added to the policy either at the beginning or after the policy is in effect. In some cases, renters may need an additional policy to cover memorabilia or antiques. For these items, a professional appraisal may be required. Otherwise, the insurance carrier may refuse to pay out the item’s estimated market value. Of course, it will cost more to include these items in a standard renter’s policy. Thus, it might be a better idea to take out a specific policy covering rare collectables, memorabilia, and antiques.