Why You Need Tenant Insurance

Many renters don’t think about getting Tenant Insurance, but understanding why you need it can be essential to your peace of mind. This is especially true if you are new to renting because often landlords will require tenants to have insurance as a condition of the rental agreement or lease.

If you’re a student, who may never have rented before, you don’t have a lot – so everything you have is important. If you’re a senior, you may have downsized and have a lifetime of memories to be protected. And if you’re anywhere in-between, you’ve got stuff you want to protect. To top it off, the cost of renters insurance is far less than that of a homeowners policy.

We often hear that renters don’t think they have much to protect, so they don’t bother purchasing tenant insurance. However, if you actually had to replace everything you own including clothes, dishes, electronics, toys and maybe even appliances – most people would not have the financial means to do so. Also, without tenant insurance you wouldn’t have any personal liability to protect yourself if you were named in a lawsuit, which could stem from a slip and fall in your home, or a stray golf ball on a golf course. Tenant insurance can provide inexpensive piece of mind.

Your Liabilities as a Tenant

As a tenant, you may be considered liable for any damage you cause to the property or unintentional harm caused to others who live in or visit the property. If you accidentally start a fire, you can be held liable for damage to the entire building. If someone is injured in your home, you can be held financially responsible for their injuries.

Your landlord’s insurance does not protect you in these cases. Nor will it cover the replacement costs of the contents of your unit should something happen due to someone else’s negligence or in the case of theft.

What is Covered by Tenant Insurance

A standard tenant insurance policy covers the costs of defending you in case of a lawsuit up to the liability limit you have purchased. Kennedy Insurance recommends a minimum liability limit of $2 million, but higher limits are available if you require them.

Contents insurance covers the cost to repair or replace the items in your unit should they be damaged by, for example, a fire. It can also cover your losses in case of theft. These costs can really add up, even if you don’t own much, so it’s important to make a thorough inventory list of everything you own.

You can also add additional living expense coverage, which pays for the additional expenses you may incur to live elsewhere while your apartment is being repaired. These can include hotel charges, food and moving costs.

Understanding Your Tenant Insurance Policy

There are generally two types of coverage offered for tenant insurance: all risks and named perils.

All risks coverage, applies to loss from all causes not specifically listed as excluded. Named perils coverage provides only for loss caused by the items specifically listed as covered.

There are two ways you can be reimbursed under your policy depending on the coverage you chose: actual cash value (ACV) or replacement cost.

It’s important to read your policy carefully to understand your exact coverage. A good understanding of the limitations and exclusions in your policy can protect you in the future, and alert you to any additional coverage you need to purchase. A settlement based on replacement value may not be sufficient for your needs.

The cost of your policy depends on many things including:

  • The amount of insurance you need
  • The type of insurance you choose (All Risks or Named Perils, Cash Value or Replacement Cost)
  • The location of your unit
  • How your unit was built and the age of the building
  • Your claims history

Talking to your insurance broker about a policy that that best fits your needs and budget can protect you in the long term. You’ll be surprised at how little it costs for your peace of mind – and to protect the things you love.