What is Renters Insurance and Why Does Need It?

However, she’s actually missing one thing: renters insurance. What is renters insurance and why does need it? 

Well, let’s start with the “what”. Like most types of insurance, renters insurance reduces the costs associated with a risk, in this case the risk of personal items being damaged or stolen, in return for a monthly fee called a premium. Not only that, renters insurance can even cover the legal fees and medical expenses that could result from someone being injured in your apartment.

Sounds pretty great right? So how does renter’s insurance work exactly? Well, almost all renters insurance policies work through a deductible and limit. A deductible is simply the amount of money they must pay per incident before them insurer pays the rest, while a limit is the maximum amount her insurer will pay.

For example, let’s say Jasmine’s insurance plan has a $200 deductible and her apartment recently suffered a fire that destroyed $5,000 worth of her personal property. Under her plan, Jasmine only has to pay the first $200 of that bill; her insurer will cover the rest up to a limit, say $25,000. 

Jasmine is intrigued. After all, saving $4,800 is pretty compelling. But still, is renters insurance truly necessary? Well, technically, no. Unless her landlord requires renters insurance, and many do, Jasmine can technically avoid the purchase.  

However, in the long-run, avoiding renters insurance just isn’t a good long-term move. One, it’s not that expensive, only about $20 a month, and two, it covers expenses that your landlord just won’t, namely stolen or damaged possessions. So, is avoiding a $20 payment each month really worth the risk of someday being saddled with a massive bill? We think not.