How Does Renters Insurance Fit in with Your Lease Agreement?

If you’ve ever rented a home then you’re no stranger to the many different aspects that make up your lease agreement. These can include everything from the number of occupants who live in the apartment to whether or not you’re allowed to have pets. Lease agreements exist to lay out the rules and regulations for living in the space. 

An experienced renter will also be familiar with a little aspect referred to as renters insurance. If you’re renting for the first time, you may be wondering what this is and how it applies to your potential lease agreement. We take a closer look at everything you need to know about how renters insurance fits into your lease agreement and how you can find the right policy for yourself.

What is Renters Insurance?

Renters insurance refers to a type of property insurance that protects tenants who will be renting. This insurance refers to rentals in houses, apartments, and condominiums. Rental insurance covers the occupants' personal property as well as any claims that could potentially be submitted for any structural issues with the property. Renters are advised to get an online renters insurance quote for each property on their shortlist of potential homes. 

Renters insurance isn’t paid to your landlord but rather to the insurance company that you’ve signed with. Your landlord may require proof of this as part of the lease agreement. The reason for this is to protect themselves from liability against damages caused to their personal property. 

What is Meant by “Personal Property”?

It’s one thing to point out that your personal property is covered, but it’s essential to know exactly what this means. In the US, personal property, in terms of your rental insurance, refers to clothing, electronics, and furniture. This type of insurance usually covers your goods being damaged by fire, smoke, vandalism, theft, and even water damage that happens on the property covered by the lease.

How is Renters Insurance Calculated?

Prospective renters should be aware that renters assurance isn’t a one-size-fits-all amount that’s added to your lease agreement. The costs of this insurance are typically calculated based on the following:

• The value of your possessions: This is calculated at the replacement cost value (RCV) to replace any damaged possessions. This will be based on the actual cash value (ACV), which is the value of your possessions after the relevant depreciation.
• Type of residence you’re going to rent: Homes such as single-family ground units may be more susceptible to instances of theft and vandalism and could see a higher renters insurance premium.
• Your location: Some areas may see an increased likelihood of you processing specific claims, which will result in higher premiums. This means that you won’t pay the same premium for an apartment in Texas as you would in California because the latter has a higher risk of bushfires destroying properties.
• Insurance deductible: Lower deductibles will usually increase your insurance rate, while a higher deductible will lower the cost of your renter's insurance policy.

What Liability Coverage Does Renters Insurance Have?

Renters insurance also removes liability from you or your landlord in the event of an accident on the property. The most common aspects covered in this instance can include the following:

• Protects you and your landlord in the event of personal injury on the property.
• Can cover any specific legal fees or medical costs if you are deemed liable for the injury.
• It may cover specific instances of property damage that the accident causes.

Considerations to Keep in Mind

When you’re taking out renters insurance, it's essential to keep in mind that criteria may vary between insurance companies and landlords. The key factors to keep in mind include the following:

• Renter's insurance policies will usually have a dollar limit as to how much will be paid out to repair or replace damaged possessions.
• The policyholder will be required to fill out a home inventory list to assess the value of each listed possession.
• Renters insurance policies may be required before a lease agreement can be signed. It’s essential to finalize your policy application before you start searching for the perfect rental unit.
• Rental insurance doesn’t cover pet damage, such as stained floors or carpets. A separate pet insurance needs to be taken out for this. Unlike rental insurance, pet insurance is paid to the landlord and is refundable if the property is returned in the same condition as it was received.

Final Thoughts

In most cases you will be required to provide proof of your valid renters insurance before your landlord issues you with a lease agreement. If you’re planning to rent a property, the most important step to take is to review different quotes and criteria on offer. It’s an effective way to keep yourself and your possessions protected against a wide range of eventualities.