By Brad Wright, CFP
Renters insurance is vital protection that often goes overlooked. If you rent your home, you should have “Renters Insurance.”
The first home that my wife and I shared together was a rented apartment in Santa Monica, CA. It was a first-floor unit, behind a locked gate, part of the west side of greater Los Angeles. It was a lively, young, and safe community, and the thought of anything nefarious happening there never occurred to us. Then, we were robbed!
My wife was out of town. I had gone out to see a movie. I arrived home to find our front door slightly ajar. I pushed it open and called out. There was no response. I then noticed a bunch of dangling wires on a shelf in the living room where the stereo used to sit. I slowly pulled the door shut and backed away from the apartment. As soon as I felt far enough away, I called 911. I told them someone had broken into my apartment, and I wasn’t sure if they were still inside or not.
The police arrived, drew their weapons, and entered our dark apartment. They didn’t find anyone. The police officers took a report and left. I took stock of the missing items, mostly electronics that they could easily carry. Stereo components and a digital clock-CD player.
The good news… we had renters insurance. We didn’t own the building or the property which meant that we weren’t responsible for anything outside of the apartment, but we did own our belongings inside. The stereo equipment, the TV, our clothes and computers, the sofa and dining room table were all ours. If we incurred damage from a fire, an earthquake, or a theft we were responsible for our belongings. Our choice was to either self-insure and take on the entire responsibility ourselves or transfer the risk to a third-party and purchase renters insurance.
Renters insurance is really inexpensive since you are insuring your belongings, as well as personal liability for anything that happens inside your home, without covering the structure. I think we paid ~$200 per year about 20 years ago. According to the Insurance Information Institute, the average cost of renter’s insurance in the U.S. is about $14.90 per month, or $179 annually (www.businessinsider.com – Feb 5, 2021). Prices will vary based on where you live and how much coverage you need. For example, states in the southeastern part of the U.S. such as Louisiana and Texas, are more expensive because they are prone to hurricanes and floods.
Because we had renters insurance, we were able to make a claim for what was stolen (and never recovered by the way). Our only responsibility was the initial deductible, which is the amount you agree to cover before insurance kicks in. Typical amounts are $500 to $1,000, in order to deter frivolous claims.
Renters insurance is worth having. There may be a small chance of ever needing it, but the cost is low enough that you probably won’t feel badly about spending the money and not making a claim versus the peace of mind of having coverage should you need it.
About the author: Brad Wright, CFP®
Brad Wright, CFP®, is co-founder of Launch Financial Planning, LLC, a fee-only firm located in Andover, MA. He is a frequent contributor to WCVB-TV and Mix 104-1 Radio. Brad is past-President of the Financial Planning Association of Massachusetts. Learn more about Brad at www.LaunchFP.com
The opinions penned here are for general information only and not intended to provide specific advice or recommendations for any individual.
The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete. Any opinions are those of Brad Wright.