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How Renters Insurance Works

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One of the most heartbreaking situations is a medical student who is contacted by their apartment complex to only receive bad news that another apartment’s fire destroyed their apartment as well as several others.  This has happened and unfortunately, the U.S. Department of Education does not allow the school to adjust the Cost of Attendance to recover losses for these kinds of disasters.

Your landlord’s home or apartment complex insurance won’t cover your items if something bad happens in your building. But with renters insurance, you can protect yourself from having to replace lost or destroyed items all on your own.  Renters insurance like any type of insurance is a protection against what may happen as opposed to what will happen.

What You’ll Learn

  • How renters insurance works.
  • How to figure out whether insurance makes sense for you.
  • Ways to choose the right renters insurance plan.

Many of you probably live in a rented house or apartment. As a renter, you don’t need to worry about the upkeep of your building, but you do want to protect your stuff—because burglars don’t care if you own your apartment or not. Even if the landlord has insurance on your building, the policy won’t cover your personal belongings should they end up stolen or destroyed by fire or a flood.

How Renters Insurance Works

Renter’s insurance works much like any other kind of insurance plan: You have a choice of different levels of coverage, which determine exactly what you’re protected from. For instance, a lower level of coverage might reimburse you for the cost of replacing your lost or damaged goods. A higher level, on the other hand, might cover the medical expenses of someone who is injured on your (leased) property or compensate you for items lost while traveling.

You pay the insurance company a fixed amount every month, and in exchange, it will pay for any damages you encounter (so long as they’re included in your policy). You also have a deductible, which is the amount you need to pay to replace your items before the insurance kicks in. So, if you’ve sustained losses of $1,000 in an accident, you might have to pay $500 on your own and the insurance company will handle the rest. And while car insurance companies provide most renters insurance, you don’t need a car to qualify.

I Only Own a Futon—Do I Need Renters Insurance?

If you’re unsure if renters insurance is right for you, the first thing you should do is go through your possessions and determine their worth. Even if you don’t think you have enough things to warrant renters insurance, it’s still a good idea to do this—you might be surprised with the final amount. Your electronics alone (computer, phone, game system, television) would probably cost over a $2,000 to replace.

Once you have accounted for the value of clothing, furniture, jewelry, books, and things like musical instruments or sporting goods, the price can get pretty high. Even if you have a steady income when you become a resident, it could be far too much for you to pay out of pocket at one time.

After you’ve finished your calculations, use this amount to determine the level of coverage you need and get a quote from an insurance company. The quote is basically an explanation of your insurance coverage: what amount you’d receive if your things were destroyed, your deductible, your payment plan, and so on.

Remember to shop around to make sure you get the best deal—comparing quotes from different companies will help you make an informed decision and get a plan that works best for your needs.

Picking the Right Plan

There are generally two types of renter’s insurance plans: plans that cover the worth of your items at the time of purchase and plans that repay you for the worth of your items at the time they were destroyed or stolen.

The first plan is more expensive, but it’s more useful when it comes time to restock your apartment after an unforeseen event. Most items decrease in value the longer you own them. So, if a fire destroys your 3-year-old laptop, you might not get enough money to buy a new one if your plan only provides the amount your computer was worth secondhand.

Luckily, the cost of renters insurance is very low—sometimes as little as a dollar a day. That’s why renters insurance can be a smart idea even if you only have a few expensive items. And that’s not even mentioning the peace of mind that renters insurance can provide; however, it’s easier to take off for the weekend when you know that, if a pipe bursts in your apartment, you’ll have help replacing your things.

Dealing with disaster is hard enough on its own (talk to those in Houston and Florida), but with renters insurance, at least your bank account won’t feel the blow as well.

The views expressed in this content represent the perspective and opinions of the author and may or may not represent the position of Indiana University School of Medicine.

Jose Espada

Jose Rivera Espada is the director of financial aid at IU School of Medicine, a nine-campus allopathic medical school in Indiana. Jose’s experience includes working as an assistant director of financial aid at Butler University and a financial aid coun...