What New Graduates Should Know About Renters Insurance

The policies cover more than you may think, and they're worth having, since the landlord's own policy won't cover you or your personal property.

Jun 29, 2014 at 7:30AM

As they venture into the real world, many new grads will look for new housing -- and most will be renting. According to census reports in 2013, the rental share of all U.S. households has been on the rise, and millennials are not immune to the trend. Surprisingly, though, a mere 35% of renters nationwide have renters insurance. If they follow this unfortunate trend of not being insured, new grads can face daunting expenses if their property is not protected. Here's what to know about renters insurance as a new grad.

The basics
While your landlord has insurance on the property itself, that policy does not protect you or your property. This is where renters insurance comes in handy. Here's a breakdown of what renters insurance covers:

  1. Personal property: It covers your possessions, simply put. This includes damages to your stuff that can happen when you're at home, such as from cooking fires, and when you're away, including theft, smoke damage, fire, or storm-related damages. Your possessions are also covered wherever they are -- whether your bike is stolen at a train station, your laptop at a cafe in Paris, or even items from your car. While you might think you don't have much to your name as a new grad, your electronics, clothes, and furniture can be expensive to replace.
  2. Liability for your guests: If a guest at your apartment party gets injured and sues, this insurance can cover the legal fees associated with your defense, as well as the victim's medical bills. Lots of new graduates get pets, but few realize that if your animal bites someone, you could be facing legal fees upwards of $26,000.
  3. Temporary living expenses: If you are unable to stay at home because of the damages, renters insurance covers hotel costs or other accommodations up to a certain point.

What is not covered
As great as renters insurance can be, there are several things it doesn't cover. These include:

  • Damages to the rental property itself.
  • Damages caused by natural disasters such as hurricanes, floods, or earthquakes.
  • Injuries that you or your roommates suffer.

Types of policies
Personal property insurance can reimburse you in one of two ways: "actual cash value" or "replacement cost." If your four-year-old MacBook were stolen, actual cash value would reimburse you for only a few hundred dollars, which wouldn't buy you the equivalent.

With replacement cost, on the other hand, insurance would pay for a brand-new MacBook.

Replacement cost ensures that you receive all of your belongings back, but premiums for this type of property replacement tend to be more expensive.

What should I look for in a policy?
According to census data, the national average for renters insurance premiums was $176 in 2008, and it hasn't changed much since then. This comes to roughly $14 per month, which is a considerable deal considering how much it covers. Most policies differ in certain respects, though, so here are a few things to consider when shopping for a policy:

  • Agreeing to a higher deductible in the case of damages will warrant lower annual premiums. Make sure if you agree to a higher deductible that you can afford it in the case of a loss.
  • Keep in mind that the average renter has roughly $20,000 in property. Policies vary depending on how much your possessions are worth. If you don't have much, you may consider a lower coverage amount.
  • "Riders" can protect special items, such as your grandmother's diamond ring or an art collection. A rider can add a few extra dollars to your monthly cost, but it would be worthwhile in the event of a robbery.
  • Since renters insurance doesn't cover damages caused by floods or earthquakes, if you live in an area with those risks, consider getting additional insurance to protect your belongings.
  • Ask your insurance provider about discounts on your annual premium for precautions such as home alarm systems, fire distinguishers, and smoke detectors.

One last tip
It's a good idea to get renters insurance separate from your roommates. After all, this coverage is intended for singles, married couples, or families who co-own their stuff. Besides being an option unavailable in some states, sharing this insurance with buddies can lead to complications when it comes to filing a claim.

Ultimately, renters insurance is a great deal, considering all of the coverage you receive. You don't want to be without it when the unexpected happens.

Warren Buffett: This new technology is a "real threat"
At the recent Berkshire Hathaway annual meeting, Warren Buffett said this emerging technology is threatening his biggest cash cow. While Buffett shakes in his billionaire boots, only a few investors are embracing this new market, which experts say will be worth over $2 trillion. Find out how you can cash in on this technology before the crowd catches on, by jumping on to one company that could get you the biggest piece of the action. Click here to access a free investor alert on the company we're calling the brains behind the technology.

The Motley Fool recommends and owns shares of Berkshire Hathaway. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers