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Is Renters Insurance Required?

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Joel Ohman
Founder, CFP®

UPDATED: Mar 13, 2020

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“Is renters insurance required” and “is renters insurance necessary” are two very different questions, but the answer to both is pretty simple.

Before we get to that, it’s important to understand what renters insurance is in the first place.

If you are currently renting, stop reading this article immediately and call a local independent insurance agent to get a policy. We’ll give you 10 minutes.

That’s about how long it takes to ensure you don’t have to repurchase everything you own in the event it’s all destroyed by an insurable loss, or that you don’t go bankrupt from being sued (and losing) for any injury someone suffers in the apartment or home you rent.

Time’s up. Doesn’t it feel better to be covered? And for about only $200 per year.

[How much is renters insurance?]

Required? As in Mandatory?

Maybe…it’s becoming far more common for a landlord to require a renters insurance policy in order to move into the property they own/manage. Why?

Landlords (or more commonly corporations who own properties) are tired of wasting their time and money defending themselves in court…and winning almost every single time when a tenant sues them for damages of any kind.

If you read your lease agreement in any detail, you may have noticed that you likely signed a hold-harmless agreement, which more or less states the landlord is not responsible for any property damage or financial loss you incur as a result of bodily injury or property damage (of other people’s property) you are found liable for as a result of your negligence.

In plain English; the landlord isn’t responsible for ANYTHING that happens to your stuff or anyone else’s stuff (including bodily injury) that results while you are staying in their property.

What Can Go Wrong?

Good question. Here are two common examples of “losses” an uninsured renter suffers – thousands of times every single day in the United States.

1. Property Damage: Your apartment is hit by a tornado, burns down, or is broken into and everything you own is stolen.

Result: If you don’t have a renter’s insurance policy, you go to the mall and spend $20,000 or more to repurchase everything you own.

2. Liability: Someone slips on your wet kitchen floor at a small get-together in your apartment and breaks their ankle, resulting in a $4,500 medical bill and $5,000 in lost wages for missing work for two months while it heals.

Result: Your “friend” sues you to recover the damages. You are found negligent for having a wet floor (perhaps a spilled cocktail) and have to write a $9,500 check, plus court costs if you bothered to “fight it” in court. Note: Add $100,000 to your bill if the slip results in a head injury.

Final Word

As more individuals and families are forced to rent as a result of the deteriorating economy, renters insurance is becoming more and more prevalent.

It is one of the most under-purchased insurance policies out there and also happens to be one of the cheapest insurance policies you can get your hands on.

If you’re renting because you can’t afford to buy, you probably don’t have enough cash in the bank to repurchase everything you currently own or pay for a HUGE medical bill you may be “responsible” for as a result of negligence.

Do yourself a favor and spring for the $200 or so it costs to cover $20,000 worth of stuff and virtually unlimited liability exposure.

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