Renters

Have you ever wondered why you need renters insurance? Read more to find out. (Image via Intermedia Images on Flickr)

If you are like the majority of renters in the U.S., you do not currently have a renter’s insurance policy.  In fact, the Insurance Information Institute claims that only about 43% of those who rent their living space have an insurance policy protecting their property.   The reasons so many renters are uninsured vary but there are some common themes.  Some have never really thought about needing a policy that will cover the loss of their property if the place they live is damaged.  Others assume the cost is too high and decide to take the risk rather than obtain a policy.  Another group believes that the insurance their landlord carries on the property also covers their belongings as long as they are in the rental property.

The problem with all of these reasons is that they leave renters exposed to the loss of all their property and no avenue for recovery.  Let’s look at why each reason trades short sighted thinking or misinformation for security.

1.     I Never Really Thought About It

If you are a first time renter, you may fall into this category.  Unfortunately, life doesn’t come with an instruction manual and unless someone points the need for this type of coverage out, you may not realize this is something you need.  Many people never really think about what will happen if there is a fire or a flood and they suddenly lose everything they own.  Many people assume there is some government agency or charitable organization that will help them rebuild their life.  While this may be true, they will help make sure you have clothes on your back, food in your stomach, and a roof over your head but they aren’t going to buy you a new computer, replace your designer wardrobe, or pay to repair the damage to your antique armoire.  If you live in a rental property and do not have insurance to cover your property, call your insurance agent tomorrow for a quote.  Don’t wait until you have to deal with it to do something about it.

2.    I Can’t Afford It

Renter’s insurance generally costs less than $20/month.  If there is a fire and you cannot live in your apartment, are you going to find a hotel that will cost you less than $20/month?  Replacing all your belongings, even if you don’t own anything you consider valuable, is going to cost far more than $20 or $200 or even $2000, which would cover the cost of a renter’s insurance policy for 10 years.  This is an excellent example of being penny wise and pound foolish.

3.    My Landlord has Insurance

While this is very likely to be true it is also very likely that your landlord’s coverage offers you no protection.  Most landlords have a policy that covers the structure and any property they have in the home like appliances.  It doesn’t cover your property or provide you with any liability protection if someone sues you.  If there is a natural disaster like a hurricane or a flood, you will have to bear the full cost of replacing any of your possessions that are damaged or destroyed unless you have a renter’s insurance policy protecting you.

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Apartment

Do you know what mistakes to avoid when renting? Image via AugustRode on Flickr

Moving out on your own for the first time can mean freedom, but it also mean financial responsibility.  While living at home, you likely had a little leeway in covering your expenses, a leeway that will no longer be there once you sign that first lease and settle into your first place.  Make this process as painless as possible by not making these common mistakes.

1.     Not Purchasing Renter’s Insurance

The number one mistake first time renters make is not understanding the importance of purchasing renter’s insurance.  Many believe that the loss of their property in a fire or theft would be covered by any insurance policy the landlord has on the property.  However, most homeowner’s insurance policies relating to investment or rental property specifically exclude property owned by tenants.  In the event of a loss, not having a renter’s insurance policy means you won’t have any help replacing the personal items that are lost or damaged.

2.     Not Knowing How Much You Need

For those moving out on their own for the first time, there are lots of unexpected expenses that can creep up and bite you if you aren’t prepared.  In order to determine how much rent you can afford, you will need to create a budget that shows all the money coming in and going out.  The consequences of breaking a lease can be expensive and breaking a lease can make it difficult to get another lease in the future.  Before you sign a lease, make sure you can afford the rent and all other expenses relating to the property.

3.     Not Paying Attention to How Much You Have

Now that you are going to have a financial obligation, you need to pay attention to where your money is going.  It is great to have a budget, but you also need a way to track that budget and make sure you are spending your money where it matters most.   Living on your own means you will need money for things you haven’t likely been responsible for before like toilet paper, groceries, and gas.

4.     Not Reading the Lease

Just like with any other legal document that you must sign, you need to read the lease in full before signing.  This is important advice for all renters, not just those who are renting for the first time.  The lease is the contract between you and the landlord and outlines all the conditions and exclusions associated with the rental agreement.  In order to be sure you know what you are responsible for and what the landlord expects from you, you must read the lease prior to signing it.

5.     Not Completing a Formal Move-In Inspection

Prior to moving into your apartment, it is critical that you perform a walk-though with the landlord that results in a documented list of any defects in the property.   You need to take this step to protect yourself before you take possession of the property.  Documenting any flaws or damage before you move in ensures you won’t be held accountable for those damages when you move out.

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