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Pros and Cons of Renters Insurance Coverage: An Assessment of Whether Renters Property Insurance is Necessary

Although renters insurance coverage may not be the most exciting purchase, it is of fundamental importance as it will help protect the legitimate financial interests of the tenant. Insurance for renters not only protects physical possessions, it also provides valuable liability coverage. Landlord insurance only protects the physical structure and foundations of the building.

Advantages of Renters Insurance Coverage

  • Liability coverage. Insurance for renters provides coverage against personal liability in the event that the tenant’s guest should suffer an injury. The policy will also cover any fees should medical expenses be incurred whilst at the property.
  • Replacement coverage policies. Whilst more expensive than its actual cash value (ACV) policy alternative, it will pay the insured a sufficient sum of money (less the deductible) to replace an item at today’s prices.
  • Unlivable property. Should the property become unlivable due to fire, vandalism or any of the reasons specified in the contract, the renters property insurance will pay for a comparably priced place to live for up to 12 months or until a repair, rebuild or relocation has taken place.
  • Deductibles. Increasing the deductible reduces the monthly premium. However, it could also make it difficult to replace an item unless adequate personal savings are set aside.
  • Discounts. Some providers of renters content insurance offer discounts for over-55’s and the retired. This is because they are often at home more and represent a lower risk.
  • Annual subscription. It may also be possible to save money by paying annually rather than on a monthly basis. It is cheaper for the insurer to manage and administrate.

Disadvantages of Renters Insurance Coverage

  • Expense. It is yet another household expense that reduces the amount of disposable income. However, this does have to be considered in the context of what it would cost to replace household goods or cover liability in the worst case scenario.
  • Flooding and earthquakes. Whilst renters property insurance protects against 17 types of risk, it doesn’t provide coverage against flooding or earthquakes. If that person lives in a high risk area, it will be necessary to take out an additional policy.
  • Actual cash value (ACV) policies. Should a claim be necessary, the insured will only receive a payment equivalent to today’s cash value. This can cause a problem when replacing older electrical goods, especially if the deductible is relatively high. The replacement cash value (RCV) option is more expensive.
  • High value items. The terms of the policy may not cover a very valuable item and this may mean that it is necessary to pay extra or take out a separate policy.

Is Renters Home Insurance Essential?

Renters insurance coverage provides a tenant with valuable financial help in the event of personal property damage or liability to a third party. This sort of coverage will not be provided by a landlord. Not all people can afford to pay further premiums, but it is possible to reduce this cost. This could be achieved by trawling the market for the most competitive prices, paying annually, increasing the deductible and/or opting for the actual cash value (ACV) item replacement option.