Renters Insurance Explained
Like other types of insurance, renters insurance provides some financial security in the event of unexpected, potentially costly damages or losses. Renters insurance protects a person’s belongings, and while landlords also have insurance, their protection generally only covers the building, not individual tenants’ property. The same goes for school-owned buildings, like residence halls and other campus-based living options. So if the person down the hall has a kitchen incident that causes the building’s sprinklers to go off, your textbooks, laptop and other expensive items could be ruined at no fault of your own. Renters insurance would help replace these items.
Travis Biggert, chief sales officer for the Mid-America region of HUB International, the nation’s largest, privately held insurance brokerage, points out that property replacement isn’t the only benefit of having renters insurance. “It protects your stuff, but, as importantly, it protects you against liability you may unknowingly assume.” This means that, should somebody get hurt in your dorm, damage be done to your unit or an accident in your apartment cause damage to your neighbor’s place, you have coverage.
Plus, renters insurance covers much more than damaged or stolen property: Renters insurance can provide coverage to help with additional living expenses in certain circumstances as well. And some policies may even reimburse losses incurred in cases of identity theft.
Despite these protections, 2016 poll found that only 41 percent of renters have renters insurance. People commonly assume that renters insurance is expensive and that their stuff isn’t worth that much. But consider this: The average price of one new college textbook was $80 in the 2015-16 school year. The average renters insurance premium — the fee for being insured — is between $15 and $30 per month, according to the National Association of Insurance Commissioners. Even if a dorm has nothing in it but a student’s textbooks for school, that student’s premium would cost less than the out-of-pocket replacement costs for those books if they were stolen or damaged. Renters insurance policies also usually cover such property items as electronics, household appliances and even clothing or jewelry, which can add up quickly if a catastrophe happens.
What Does Renters Insurance Cover?
Even a basic renters insurance policy typically provides college students with coverage in three main areas:
It’s also important to understand what renters insurance doesn’t cover. Insurers often limit the protections offered in known earthquake and flood zones, due to their inherent risks. Also, expensive items such as some jewelry and electronics are usually subject to individual coverage limits. However, add-on policies, called floaters or riders, may be purchased to provide extra protection in areas that a basic policy might not cover.
Biggert says it’s also important to know exactly what an insurance company’s theft protection entails. “Understand that theft, which usually comes with some sign of forced entry into your home, is covered,” Biggert says. “What is not usually covered is what the insurance industry calls ‘mysterious disappearance.’ There is a whole separate type of policy, called a personal articles floater, that will pay if one of your valuables is just ‘gone.’ An example would be someone who wears an expensive wedding ring or watch into the ocean, and when he or she gets out, it’s gone. That’s not theft because nobody broke into your home and stole it; it’s just mysterious disappearance. Ask about these things, so you don’t learn the hard way once your valuable is gone.”
When Do College Students Need Renters Insurance?
Renters insurance is most important for college students who aren’t living on campus or at home. In other words, students who aren’t protected under their parents’ homeowners or renters insurance should get policies of their own. Even if students are covered under their parents’ policies, their acceptable claim amounts may be limited to a small percentage of the coverage amounts extended to their parents, so students’ coverage may not fully protect the value of their belongings, they should make sure that the amount of protection extended to them through their parents’ policies actually covers the value of their belongings.
Many parents’ insurance policies only extend a small percentage of the overall coverage, often 10 percent, to students living away from home. For instance, if the parents’ homeowners insurance policy provides $100,000 of coverage, their student could only receive up to $10,000 from a claim. Students who are covered by their parents’ homeowners insurance but plan on bringing highly valuable items to school should make sure they have enough coverage, and, if not, they should either get their own policies or look into purchasing floaters or riders for specific items.
Some policies also place value caps on certain types of items, like electronics. A student whose electronics are worth more than his or her policy coverage should consider a policy more suited to that person’s individual needs and valuables or consider adding floaters for specific items.
Whether they are living on or off campus, students should look carefully into their renters insurance policies or, if applicable, their parents’ policies to make sure they have adequate coverage. Policies can vary widely, and, depending on restrictions, caps, deductibles and other fine-print stipulations, it may be more practical for students to get their own rental insurance policies rather than use their parents.’ Students and their parents should speak to an agent to determine the best option for their individual needs.
When Don’t College Students Need Renters Insurance?
Of course, there are situations in which purchasing renters insurance simply may not make sense. For example, students attending college who commute from homes they share with their parents will not need renters insurance because they are already covered under their parents’ insurance policies.
This also usually applies to students who live on campus in dorms or other school-affiliated housing, as they may still have coverage under their parents’ homeowners insurance policies. It’s important for students and their families to check the details of their existing insurance policies to ensure adequate coverage can be provided. Even if students don’t need renters insurance, it might be appropriate to get insurance endorsements for specific items that exceed policy limits.
Finally, anyone living in a temporary housing situation — for instance, crashing on a friend’s couch, in an Airbnb rental or in a hotel room — is not eligible for renters insurance. Typically, the host is responsible for obtaining short-term insurance for these situations, and some insurers sell specialized short-term policies to guests in these situations.
Shopping Around for Coverage
Finding a renters insurance policy that fits a student’s particular needs can take a bit of time and research. Talking with a range of providers and comparing policies can help students and their families make sure they get the right coverage for them. Take advantage of free quotes as a cheap and easy way to make some basic policy comparisons.
“I recommend an independent insurance agent,” Biggert says, “because they have access to numerous insurance carriers and can give you an idea of who has the best pricing and terms in the specific area where you live.”
When shopping around, students should make sure they have a full understanding of policy coverage because not all renters insurance coverage is the same. Ask about exclusions and limits, and find out whether add-ons are needed for specific items. Considering the overall value of a policy or the amount of coverage you get for the price, rather than just the premium, can help students make more accurate comparisons between various renters insurance policies. Students should think about their practical needs, too, to avoid paying extra for coverage they may not actually need.
So how much coverage do you need? A good way for students and their parents to determine the right amount of coverage is to take a detailed inventory of everything the student plans to take to school. Laptops, clothes, textbooks and furniture add up quickly. Creating a personal inventory of belongings and their values not only makes it easier to see how much coverage is needed, but it also eases the process of filing a claim should an incident occur. At this already stressful time in families’ lives, mitigating as much stress as possible in cases of loss is always a plus. Keep a copy of the list in a safe place, like saved in the cloud or in a safe deposit box, and update it regularly.
Also ask agents about how much liability coverage is included in their policies. Biggert recommends a personal liability limit of at least $500,000.
Insurance companies may offer discounts when students bundle their renters insurance with their auto insurance. Students also can talk to their insurance agents about other ways to save money, such as discounts available through affiliations with schools or employers. Parents who are members of alumni associations might be able to get some good deals, too. Reducing risk of theft and damage to an apartment can also earn students some discounts, although this may require collaborating with landlords. Installing deadbolt locks, security systems, new smoke detectors or fire extinguishers lessen the risk of theft or damage, so insurance companies may offer discounts to students who take these precautions against claims.
Even if savings don’t seem significant right away, students can get new quotes every few years to lower their renters insurance expenses. An improved credit score and a claim-free record can yield a better premium down the road. On average, though, renters insurance is pretty affordable. The following table breaks down the average premium for renters insurance by region.
Source: National Association of Insurance Commissioners via the Insurance Information Institute.
Other Factors to Consider
Along with determining whether a student is covered under his or her parents’ insurance policy or will need an individual policy, and figuring out how much protection will feel comfortable without draining the bank account, students should take into account a few other factors before making a decision about renters insurance.
Deductibles, for instance, can greatly affect a student’s decision to go with one policy over another. A deductible is the amount a student must pay out of pocket before the policy takes over to cover additional costs, up to its limit. Deductibles can often be lowered, but it means having to pay a higher premium. Do some calculating to figure out whether saving on the premium is worth a higher deductible in case of damage or less. Shaving $10 off your premium might seem nice, but if it means having to pay $1,000 out of pocket to replace losses in a claim instead of $500, that $10 a month saved may seem inconsequential. Ideally, a deductible should be an amount a student can have readily available in case of emergency. Keeping it in a savings account or a safe deposit box along with that inventory list is a good idea.
“Always get a ‘replacement cost valuation’ endorsement when it comes to property losses,” Biggert adds. “Use that exact term. The insurance agent will know what it is, and you’ll be glad you did if you ever have a claim.”
A policy with a replacement cost valuation covers the cost of replacing a given item at its actual cost, rather than at its estimated value, which factors in depreciation.
Students should also take into account their locations and whether they plan to have roommates or pets. If a student needs to keep some belongings in a storage unit, that student should determine whether those items would be protected. These variables can affect policies and should be discussed with an insurance agent.
Coverage limits should also be considered. Renters insurance policies have overall limits for personal property, liability and additional living expenses as well as limits within certain categories, like electronics. If a policy meets a student’s needs in terms of personal property protection but is lacking in liability coverage, that student could be in trouble if someone gets hurt in his or her apartment and decides to sue. Similarly, a policy could look great at first, but maybe its coverage for electronics loss is limited. If most of a student’s valuables are electronics and the policy only covers $1,000 in electronics with a $200 deductible, it may not be the best option. Getting insurance for individual items, such as phones, laptops, TVs and gaming consoles, can be a nice alternative to a more extensive renters insurance plan. Many of these big-ticket items also are sold with the option to add insurance or replacement protection at the time of purchase.
Allstate Digital Locker
Allstate insurance company offers this inventory app that can be used by Allstate customers and noncustomers alike. Log and organize belongings, store the list in the cloud and, if you’re insured with Allstate, send the list to an agent quickly and easily.
This in-depth inventory app gives renters the ability to make comprehensive lists of everything they own. Encircle allows users to take photos of their belongings, check prices in-app and easily create PDF documents. Users also can use the Encircle website instead of, or in conjunction with, the app.
Insurance Information Institute – Homeowners + Renters Insurance
Browse through a variety of articles, videos and guides to learn more about insurance for homeowners and renters, including how to save money on renters insurance and coverage details.
iKeepm is an online, cloud-based inventory platform and is a great solution for those who like a clean interface without being limited to apps. Organize your belongings, upload receipts and other documents, generate reports and access inventory lists from anywhere.
Liberty Mutual Home Gallery App
Like Allstate, Liberty Mutual has an app that allows customers to take photos of their belongings, log them in a list and get value estimates.
Created by the National Association of Insurance Commissioners (NAIC), Insure U is a public education program intended to help people “get smart about insurance” of all types, including renters insurance.
National Student Services, Inc., Blog
National Student Services, Inc. (NSSI), is an insurance company aimed specifically at college students. While its policies may not be the right fit for everyone, NSSI’s blog features a huge array of information that might prove useful to students looking to protect their stuff. Plus, this blog contains tons of fun posts unrelated to insurance and finances, too.
National Association of Insurance Commissioners’ Glossary of Insurance Terms
While this page isn’t exactly lighting reading for students, it can be a valuable tool when they’re sorting through insurance policies that contain unfamiliar terminology. The NAIC’s glossary can help students understand exactly what insurance agents are talking about, which can mean getting a better policy.
Sortly is a unique inventory app that, unlike most, allows users to take photos of entire rooms rather than of each item on their lists. A student can snap a handful of pictures of a room and tag the bed, appliances and other items. Sortly’s lists not only can be used when determining values for insurance purposes, but they’re handy for moving, too: Lists can be converted into custom QR codes. Put the barcode on a box when moving, and all you need to do is scan the code to know exactly what’s inside.
Allstate: What’s Your Stuff Worth?
This simple, interactive tool can give students a general idea of the value of their belongings. Students simply move a slider until the room on the screen looks like it has about as much stuff as their own rooms. Value estimates are based on national averages.