What Is Renters Insurance? Do I Need It?

When renting a house or apartment, you might assume that it’s only your landlord’s responsibility to look after things like insurance. After all, it’s usually your landlord you call when things go wrong with the house.

But some renters forget that when it comes to taking steps to protect their own belongings, it’s up to them to ensure they’re properly insured. In fact, according to a 2016 survey by Understand Insurance, the majority of tenants don’t insure their belongings at all. This could be cause for concern when you consider how prone certain parts of Australia are to incidents like floods and fires.

In the event of a disaster or break in, not having insurance can be stressful, potentially leaving renters with a sizable dent in their bank accounts. Renters insurance is designed to provide a safety net for tenants who find themselves in this situation and need help getting back on their feet financially.

So what is renters insurance? And what can it cover?

What is renters insurance?

Renters insurance is a type of contents insurance designed specifically for people who are renting a property. It works to protect your belongings if they are stolen or damaged due to certain events like fire and theft. Say someone breaks into the home you’re renting and steals your TV. If you have renters insurance, the cost of replacing your TV could be covered.  

Depending on your policy, renters insurance may also protect you against some legal liability. This means that if someone injures themselves or their possessions at the property you are renting, you could be protected against having to fork out huge legal costs and footing their medical bill. Some policies may specifically offer visitors’ belongings cover, which may cover you in circumstances where a guest’s belongings are damaged due to certain events like fire and theft.

Some insurance providers may also cover the cost of temporary accommodation if your rental property has been damaged to the point where you can’t live there.

In many cases, renters insurance is the same or very similar to a contents insurance policy that would be taken out by a homeowner. This means that when applying for a quote for one of these contents insurance policies, you would simply need to specify that you’re a tenant.

The table below displays a snapshot of contents insurance policies on Canstar’s database, sorted by Star Rating (highest to lowest) and then by provider name (alphabetically), with links to providers’ websites. Results are based on a policyholder aged below 50 years in NSW and ACT for contents worth less than $75,000. For more information and to confirm whether a particular policy will be suitable for you as a tenant, check upfront with your insurer and read the Product Disclosure Statement of each policy before making a commitment.

Why might I need renters insurance?

When you are renting, the owner will generally take out home insurance or landlord insurance to protect their property. The owner is responsible for repairing any damage to the physical property. However, they are typically not responsible for any damage or loss that occurs to your personal belongings. It is usually the renter’s responsibility to protect their own items if they choose to do so.

Given their belongings may not be otherwise protected, taking out a suitable insurance policy could be a step worth considering for renters, particularly when they start to add up how much their belongings may be worth. Think about the cost of your furniture, electronics, clothes and other valuables – it could add up to more than you realise. 

What belongings can I protect?

Clothes, cameras, the couch, the kettle – you get the picture. Generally speaking, you can insure all of your important belongings, although be sure to check if your policy has any exclusions before committing. One potential exclusion could be home office equipment used for running a business, which would potentially need to be insured separately.

Your provider might also put a limit on what you can claim for each item. For example, they could limit your claim to $1,000 per item. Therefore, you may want to insure particularly expensive items like jewellery and antiques separately on your policy. But keep in mind, this may raise the price of your insurance.

Flooded couch furniture

Source: Robert Kneschke (Shutterstock)

What events can I protect against?

Most contents insurance typically protects your possessions against fire, storm and theft as a minimum. Policies may also cover you in the event of occurrences such as:

  • Cyclones, floods and hail
  • Earthquakes and tsunamis
  • Water runoff and leaks
  • Lightning and power surges
  • Impact damage. For example, loss or damage caused by the impact of a motor vehicle or falling tree.
  • Pet damage
  • Food spoilage

Looking to protect your belongings from flood damage? The table below displays a snapshot of contents insurance policies on Canstar’s database, sorted by Star Rating (highest to lowest) and then by provider name (alphabetically), with links to providers’ websites. Policies shown include storm surge flood cover, flash flooding and riverine flood cover. Results are based on a policyholder aged below 50 years in NSW and ACT for contents worth less than $75,000. For more information and to confirm whether a particular policy will be suitable for you as a tenant, check upfront with your insurer and read the Product Disclosure Statement of each policy before making a commitment.

How much does renters insurance cost?

The cost of insurance is likely to depend on how much coverage you decide on, along with other factors determined by your insurer. Providers usually consider things such as the insured amount, the security features on your home, your suburb’s crime rate and your suburb’s risk of floods and fire to work out your premium.

You may be able to keep the cost of a policy down by shopping around a variety of providers to find one that suits your needs at a price you can afford.  It may also be cheaper if you pay your premiums annually rather than on a monthly basis. Additionally, some providers will offer discounts when you apply online. You can compare over 100 contents insurance policies with Canstar. Before purchasing a particular contents insurance policy, it might be worth checking in with your insurer or reading the PDS to confirm whether the policy will cover you as a renter.

Compare Contents Insurance

How does renters insurance work?

Before taking out a policy, it is important to accurately estimate the total value of your possessions to ensure you’re properly covered. One way of doing this is by using a contents calculator. It may be a good idea to use a calculator that asks a number of detailed questions in order to get a more accurate result. It could also be worth getting independent valuations for more expensive items.

Once you’ve purchased your insurance policy, make sure to keep a detailed record of your assets in case you ever need to make a claim – things like receipts, photos and valuations could prove important. If you do need to make a claim, a detailed inventory will likely be essential to verifying your losses and getting you compensated.

How will I be compensated?

Some providers offer new for old replacement on covered items. This means that if your belongings are stolen or damaged, you would be able to receive new equivalent items to replace them. But this doesn’t mean you’ll be able to upgrade your item. So if your old Nokia brick is damaged, you’re probably not going to be able to get a new iPhone. Instead, you may be able to replace your phone with a new model that closely mirrors the old one’s specifications. New for old replacement is not available for all things, though. Items like clothing and bedding that are prone to wear and tear usually won’t be included, or a reduction may be made to take this into account.

Alternatively, providers may offer value replacement. The main difference is that this takes into account depreciation, which is when an item falls in value over time. So if your $1,000 laptop has dropped in value by $500, you would only receive $500 to replace it. Because new for old replacement offers you a higher level of cover, the premiums will be likely more expensive than value replacement.

Phone in water

Remember, renters insurance may not mean a phone upgrade if your ‘classic’ model needs to be replaced. Source: SJ Travel Photo and Video (Shutterstock)

Can I get renters insurance if I am living in a sharehouse?

Insurance policies typically don’t let you pick and choose which rooms to cover. This means you may not be able to just insure your room, and instead you would need to take out insurance for the entire household. Be sure to check the policy as some providers will put a limit on the number of people who can be named on a single policy.

Depending on whether or not your housemates want to chip in, you can either add or leave their stuff off the valuable items list. If you do choose to only cover your own belongings, this could help keep premiums low.

If you are living in a sharehouse, one option could be to take out a low-cost contents insurance policy designed to protect your belongings against things like fire and theft. However, you may not be covered if a housemate steals or deliberately damages your belongings. Again, it’s a good idea to check carefully what is and isn’t included on your specific policy before taking it out.

 

Image Source: Lucky Business (Shutterstock)

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