Many landlords and tenants have heard of renter’s insurance, but do you know what it does and why it’s so important to the rental industry? For tenants that want to protect their personal property and avoid liability claims, renter’s insurance can play a vital role in being a good tenant. In addition, both landlords and tenants can benefit from renter’s insurance. So, read along as we go over renter’s insurance coverage and how it can benefit your renting experience.
What Is Renter’s Insurance?
Renter’s insurance is essentially property insurance that covers a tenant’s personal belongings, liabilities, and sometimes living expenses in case of an emergency event. Insurance is available to people who rent or sublease a rental home, apartment, duplex, condo, etc., and protects against losses to the tenant’s personal property within the rental.
Renter’s insurance protects against liability claims, such as injuries on the property. Also, remember that your landlord’s property insurance will likely not cover your personal belongings in a rental. However, if theft, a fire, or other natural disaster occurs, your landlord’s insurance covers the property’s structure. On the other hand, you’ll need renter’s insurance to ensure your property is covered at a rental property.
Renter’s Insurance Coverage: How Does It Work?
If you don’t have renter’s insurance and something happens to your possessions at a rental property, it’s your responsibility to replace them out of pocket. However, if you do have renter’s insurance, it could cover property damages or destruction. Here are the three main types of financial protection that renter’s insurance offers tenants.
- Renter’s Insurance Coverage for Personal Items
- Liability Protection
- Renter’s Insurance Coverage for Other Expenses
Renter’s Insurance Coverage for Personal Items
If you live in a rental and lose personal property due to a fire, theft, or other disastrous events, renter’s insurance will replace your items. As such, you should buy enough renter’s insurance to cover all of your possessions in the event of a loss. You can do this by creating a list of your personal possessions and the estimated value of each item.
Additionally, renters can choose between replacement cost or actual cost value (ACV) while looking at the renter’s insurance coverage options. ACV only covers what an item was worth at the time you purchased it. On the other hand, even though it costs more, replacement cost coverage provides a big enough payout for you to replace your items at the current total retail price.
It’s essential to keep in mind that your renter’s insurance only covers losses due to fire, smoke, vandalism, lightning, theft, explosions, windstorms, and some water damages. However, most renter insurance doesn’t cover flood or earthquake damage. Some renters may opt for flood or earthquake insurance, depending on where they live in the US.
Along with personal property coverage, renter’s insurance also provides liability protection against lawsuits for injuries or damages done to the property. Liability protection covers legal defense costs up to your policy limit.
If you’re looking into renter insurance coverage, ensure your policy includes no-fault medical coverage. Then, if someone gets hurt on the property, they submit their medical bills directly to the insurance company.
Renter’s Insurance Coverage for Other Expenses
Suppose a fire destroys your rental property along with all your possessions. Additional living expenses (ALE) coverage gives renters financial protection against a destroyed property that makes it necessary to live elsewhere temporarily.
This portion of your renter’s insurance will cover hotel bills, temporary housing, meals, and other expenses while your rental is repaired or rebuilt. Additionally, some insurance companies may reimburse you for the difference between your additional living expenses and everyday living expenses due to a disaster.
Average Cost of Renter’s Insurance Coverage
The cost of your renter’s insurance coverage can differ depending on where you live in the United States. For instance, the average is around $15-$20/month. However, it also depends on how much renter insurance coverage you need for your personal property.
Renters with more belongings will need to buy more coverage each month. Although you’ll pay a higher premium, the extra coverage is vital for tenants with a lot of personal property.
Additionally, the cost of your renter’s insurance depends on your coverage. For example, if you opt for replacement cost coverage, it’ll offer more protection. However, it’ll cost more than the actual cost value (ACV) renter’s insurance coverage.
If you’re wondering how much your renter’s insurance costs in Maryland, the average is around $191/year. However, in some states, such as Michigan and Louisiana, renter’s insurance could cost you over $400/year. The cost of your renter’s insurance ultimately depends on the likelihood of a natural disaster or a high crime rate area. If you’re wondering how to get renter’s insurance coverage, talk to your landlord or Baltimore property managers.
Benefits of Renter’s Insurance for Tenants and Landlords
Renter’s insurance offers several benefits to both landlords and tenants. One of the more clear benefits is that it protects tenant property from certain damages or destruction. Additionally, renter’s insurance provides tons of benefits for landlords as well. Here is why some landlords require renter’s insurance for their rental properties.
Benefits for Tenants
- Protects Tenant Property- One of the largest benefits for tenants is that renter’s insurance is the only way to protect their property in the case of some emergencies.
- Aids Tenants with Emergency Funds- Additionally, renter’s insurance can help tenants in an emergency by providing relocation assistance.
- Peace of Mind- When a major disaster or loss occurs, it can be devastating for both landlords and tenants. With renter’s insurance coverage, you can feel a little more at ease knowing your property is protected.
Benefits for Landlords
- Lower Homeowner’s Insurance Rates- If someone files an insurance claim, your premium will inevitably arise. However, if a tenant has their own policy, it shares the financial burden and won’t dramatically raise your insurance premium.
- Reduces Risk of a Lawsuit- Renter’s insurance can help landlords and tenants avoid lawsuits if there’s a dispute over who’s responsible for property damages or liability claims.
- Added Protection from Property Damage- Most landlords implement a security deposit to hold tenants accountable for property damages. However, if damages add up to more than the security deposit amount, the renter’s insurance can help landlords get back some of the cost.
How Can You Further Protect Your Rentals With Property Management?
Many landlords require renter’s insurance to protect their investment and their tenant’s property. Luckily, there are several things you can do to get peace of mind while owning and operating a rental business. For instance, Bay Property Management Group has the experts and resources to protect your investment and maximize your ROI.
Bay Property Management Group offers comprehensive rental services to busy landlords–whether you own one rental property or multiple. Contact BMG today if you need rental management services in Baltimore, Philadelphia, Northern Virginia, or Washington DC.