We’re going to look at why you need property insurance (homeowners and renters).
“I have enough expenses to worry about.”
“I’m only renting. I don’t actually need insurance.”
Do any of these comments sound familiar? I’ve heard from many readers who simply don’t want to spend the money on getting renters insurance or homeowners insurance because they feel that this expense is optional. Speaking from experience, property insurance is a hassle until your place floods and you realize that you don’t have to pay for anything because you have insurance.
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Did you know that property insurance would cover the costs of damages done to your property, replace all of your belongings, give you a place to stay and even protect you legally in the event that you were to get sued for something that happened at your place?
Believe me, I wasn’t excited about spending money on property insurance when I first moved out, but it ended up saving me in 2020 when my rental unit flooded.
According to this article on Policy Genius:
“Personal property coverage is a type of protection that you find in every homeowners insurance, condo insurance, and renters insurance policy. It protects your personal belongings — along with the belongings of blood relatives who live at the insured residence — up to the coverage limit specified on your home insurance declarations page.”
You can click here to see the difference between renters and homeowners insurance. For the sake of this article, we’re going to look at the general idea of property insurance.
When you move out on your own for the first time you’re going to be surprised by the expenses that come your way. You’re going to be hit with fees that you didn’t see coming. Trust me, there’s nothing more annoying than constantly buying toilet paper or trying to find a cheap lawnmower.
This is why it’s going to be tempting to avoid getting property insurance. I totally get it. I understand that life’s expensive. However, it’s important that you protect what you currently have while you try to obtain more.
Why do you need property insurance for your place?
Here’s why you need insurance in case you’re on the fence about this purchase.
Your personal belongings
Are your belongings valuable? Do you have items that you couldn’t imagine going without?
Property insurance would replace your items up to the coverage limit due to theft or any damages that occur due to an accident.
Your property insurance will protect your personal items even when you’re not home. I was surprised to learn that insurance replaces items that are damaged or stolen even when you’re travelling.
Even if you think that you don’t have THAT much stuff, you’d be surprised by how much you actually do have. Once you take a picture of your valuables and begin to tally up how much coverage you require, you’ll see that your valuables quickly add up.
For example, a few electronics along with your best pair of jeans could quickly add up to thousands of dollars. If you’re anything like me, you worry about the worst-case scenario and you can’t imagine going without your laptop.
Your insurance would replace your items for you in the event of any covered loss or damage.
Here are a few common examples of how renter’s insurance would cover your belongings:
- Your place gets broken into and damaged. Your TV is destroyed and your laptop has been stolen. Your items would be replaced up to the coverage limits.
- You accidentally start a kitchen fire and your clothing/couch gets damaged. Insurance would replace your belongings.
- Your luggage gets stolen on vacation. You could file a claim and have your items replaced.
This is why property insurance is needed. Your personal belongings are valuable and you worked hard to accumulate everything that you own. It’s important that you protect these items.
Did you know that someone could sue you if they get injured on your property?
You’re probably thinking, “My friend would never sue me!”
I understand that. It doesn’t have to be your friend though. This could be anybody. Someone who comes over to do work on your place could trip over a wire and get injured. I realize how silly that sounds, but we have to be prepared for anything in life as we’ve learned during this chaos.
Your property insurance would cover the legal expenses along with the fees associated with the medical bills of that person. A standard insurance policy starts with $100,000 in liability coverage along with additional coverage for medical bills for others.
Damages to the property
If you’re a homeowner, you’re going to want to protect the structure of your property.
If an accidental leak damages your unit and the unit below you, you’re on the hook for the expenses. This could add up quickly.
Put it this way, imagine you leave the sink running or you have an accidental kitchen fire. Then imagine that this accident damages your unit and the units around you. You’re going to be responsible for the damages. I don’t know about you, but I don’t have an extra $20,000 sitting around to pay for a new floor.
These are costs that add up. Being on the hook for a new sound system or floor isn’t cheap.
I don’t want to fear monger, but you don’t want to become a statistic. You don’t want to go bankrupt or get sued because you didn’t have insurance for your place.
In my situation, I had my rental property get damaged due to work being done by the condo. They were working on the plumbing and this flooded my entire place through zero fault of my unit.
This is the unfortunate reality. You need insurance to be prepared in the event of something out of your control happening. While I wish that my unit wasn’t the one that got flooded, I can’t wish away the damages. Luckily, my insurance took care of everything. I don’t even want to know what the bills were like for this project.
Medical payments to others
Did you know that you could be on the hook for the medical bills if someone were to get injured while visiting you?
I realize that this isn’t a pleasant thought but it has to be addressed. As mentioned earlier, property insurance comes with coverage for medical bills that guests incur.
A place to stay
If you can’t live in your unit while it’s being repaired due to the covered damages, your property insurance would cover your living expenses. This covers the hotel (Airbnb and any other lodging) expenses and you won’t have to worry about begging a buddy to sleep on their couch.
Property insurance would also cover other potential expenses (from parking to meals) while you can’t living in your unit.
Home insurance has bailed me out in the past and I couldn’t imagine what would’ve happened to my finances if I didn’t have insurance. Well, I would’ve been down approximately $30,000 if I had to pay for all of the damages on my own.
What should you look into with your property insurance?
So you know that you need property insurance. Let’s move on to the next step.
What should you consider at this point when looking into property insurance?
- The coverage that you need for your situation. We all have a different living situation and budget. It’s important that you get the adequate amount of coverage to ensure that all of you expensive items are covered (think of your laptop or wedding ring for example).
- The history of the company. When it comes to time to file a claim (hopefully never) you want to know that your company will be easy to deal with.
The good news is that you can shop for quotes online and customize every aspect of your property insurance.
Your questions on property insurance
I’ve received many questions over the years on the topic of insurance. Let’s look these over to provide some clarity on the topic.
“I’m only renting. Do I really need insurance?”
Yes. Your landlord’s property insurance will only cover the structure of the unit and not your actual personal belongings. What this means is that you would have to pay out of your own pocket to replace your couch and electronics.
“I don’t have that much stuff.”
You have more than you think. Just for fun, try adding up the prices of your main electronics. That could easily hit $5,000. Then you throw in your couch and furniture. The personal belongings add up quicker than you think.
“Is renter’s insurance mandatory?”
It’s not always technically mandatory. Some landlords will require that you get renters insurance. As a homeowner, it could be difficult to obtain a mortgage without proper insurance.
“I don’t have the money.”
I’m with you. The good news is that you can customize a renter’s insurance policy to match your budget. Policies can start for as little as $5/month.
“Isn’t property insurance expensive?”
Insurance doesn’t have to be expensive. You can customize most policies to your budget and your lifestyle.
“What other types of insurance do I need?”
You may want to look into life insurance and pet insurance if you want to be fully protected. You can bundle your insurance policies to save money.
I hope that you never have to file an insurance claim. The goal is to have insurance so that you’re protected. The money you spend upfront on insurance today will protect you in the future.[This post is contributed by Martin of Studenomics, where he tries to make personal finance fun since you have enough to stress about. You can click here to check out the wide range of content on everything from student loans to getting paid to drink coffee.]