When looking for the perfect apartment, your checklist might look a little something like this: closet space, lots of light and affordable. But unless you have renters insurance, the perfect unit can quickly turn into a major financial — and emotional — burden in the event of an accident.
Renters insurance is one of those purchases you always want to have, but never want to have to use. Unfortunately, findings from Prudential Financial’s survey The Cut found that insurance isn’t a financial priority for millennials — and that’s an issue because research from the Joint Center for Housing Studies of Harvard University found that a third of American households are rented.
“[Millennials] tend to save more in easily accessible accounts, and less in long-term investments,” said Amanda Clayman, financial wellness advocate at Prudential Financial. “That would suggest that goals like an emergency fund are being addressed, but something like [renters] insurance, which is another encumbrance on income, may be deferred.”
She said that renters are unlikely to consider insurance until they amass a significant number of assets or think about becoming parents. “Millennials are doing these things later in life than in previous generations, which may contribute to that difference,” she said.
Here’s what you need to know about renters insurance and why it’s important.
What it is
Basic plans cover personal assets like furniture, clothes, jewelry and electronics in the event of theft, burglary and fires, according to Janet Alvarez, personal finance expert and executive editor of Wise Bread. Keep in mind that renters insurance doesn’t cover floods or earthquakes, so you’ll need to purchase those separately, especially if you live in an area vulnerable to those occurrences.
Depending on the policy, the insurance company will reimburse you the cash value of the lost or damaged items after factoring in depreciation, or compensate you with full cost of a replacement item. “It can also provide personal liability protection if anyone is harmed in your home and makes a resulting claim against you,” Alvarez said.
If you’re undecided about renting vs. buying a home, keep in mind that renters insurance will give you the same protection benefits at a lower cost. “Renters insurance is usually much cheaper than typical homeowners’ policies, with some costing as little as $15 or $20 a month,” said Jason Hargraves, managing editor at insuranceQuotes. Unlike homeownership, your landlord is responsible for covering the physical structure of where you live.
Why you need it
According to Hargraves, your renters insurance also covers belongings that are damaged or stolen outside of the home. “For instance, items stolen from your car are covered under your renters insurance, not your auto insurance, which comes as a surprise to many people,” he said. What’s more is that, like homeowners insurance, renters insurance will foot some of the bill of your temporary housing in the event it is undergoing repairs.
For Clayman, buying renters insurance has virtually no downsides. “As insurance products go, it’s pretty inexpensive, meaning you don’t notice much when you’re paying it,” she said. “But when you need it, it really makes a difference whether you have it or not.”
How to get it
Alvarez said renters insurance is available for purchase in person, by phone, or online from a variety of major insurers like Allstate, Nationwide and Liberty Mutual. She also pointed out that renters insurance is available from smaller insurers exclusively online, like Lemonade, which prides itself on donating a cut of sales to various charities.