Renting: Do you need Homeowners Insurance?
Most people associate Homeowners Insurance with the need to insure against a fire loss. As a tenant you don’t own the building you are renting, so why carry Homeowners Insurance? Most renters assume the building owner is responsible to cover their personal property damaged or lost in a fire. They assume the landlord has to pay to house you temporarily after a loss. How about a burglary of your rented home? Who’s responsible when you or one of your kids cause a fire in that rental property? Renters are generally uninformed about who is responsible for such damage or losses.
Homeowner’s Insurance is a general term we usually think is limited to insurance for a home you own. There are several different policy formats: as a single family home you own, a multi-family home you own and occupy, a condominium you own, or as I will focus here, a house, apartment, or condo that you rent. The Renter’s policy form is similar to that of a conventional homeowner’s policy except it does not include coverage for the structure in the event of a fire, hurricane, roof leak, tree falling on the house… The renter’s personal property is covered. The renter’s liability if they cause someone to be injured is covered. If the renter’s negligence causes damage to the rental property that too would be covered under a Renter’s Policy.
To show the need by example, here’s an actual case. When a young couple moved into their apartment, I tried to convince them to take out a Renter’s Policy. Like so many others, their response was, why would they need renter’s insurance? They didn’t own the building. They had mostly used furniture of limited valuable. What liability could the couple incur that wouldn’t be covered by the landlord?
Then on a Saturday afternoon, one of them was trying her hand at frying chicken while watching a World Cup Soccer game on TV. Through the distraction, the grease caught fire resulting in extensive damage to the kitchen. The couple was forced to move temporarily from their apartment. They assumed the property owner’s insurance would pay for the damage; to their apartment, their possessions, and the neighboring apartments. What a surprise they got!
Immediately after the fire the landlord’s insurance company came in and cleaned up the smoke and water damage throughout the building. The apartment’s kitchen cabinets were all replaced, as was the ceiling, the floor, the counters and… Then they re-painted not just their apartment but most of the interior hallways of the building.
The couple’s first surprise was that the landlord’s insurance company refused to reimburse the costs for their temporary living expenses while their apartment was repaired. Next, they learned that the damage to their possessions was not going to be paid for by the insurance company. The real shock came when they received a bill from the landlord’s insurance company for the $45,000 it took to restore the building. A month or two after the fire, the downstairs tenant began demanding they pay his $500 deductible for the water damage to his furniture.
The couple called me after hearing from the insurance company to question if the insurance company really could require them to pay all those damages? They left the pan of grease on the stove which caused the fire. The building owner did nothing negligent to cause the damage. They were the ones responsible for the fire and as a result should be responsible for all the damage.
Had they taken out a Renter’s Policy the damage to the building and the neighbor’s property would have been covered under the liability section of the policy. Their damaged personal property would have been covered for its replacement cost. The temporary living expenses for the hotel they stayed in for the two weeks following the fire would also have been covered.
Assurnat Inc. did a study on perceptions of renters that was reported on in an article of the July 2019 issue of The Standard, an insurance trade magazine. 36% of those surveyed indicated that they did not need Renter’s insurance because “the landlord or property management company would be responsible for a loss. Further in the study when asked if the landlord was responsible for theft of a tenant’s personal belongings, only 19% said yes. For those that acknowledged such a loss would be theirs to deal with, their reason for not having gotten Renter’s Insurance was that they didn’t know it was available for them, it was never offered to them, or thought it would be too expensive.
Later in the study they asked respondents to estimate the “Replacement Cost” value of all their personal property (contents). 59% underestimated the replacement cost of their belongings. The study also asked whether the tenants thought items or activities would be covered such as:
93% were unaware that they’d be covered if their dog bit someone.
81% didn’t think a rug ruined by a toilet overflowing would be covered.
84% would not have expected that a guest having tripped and broken an ankle while visiting their apartment would be covered
57% did not know that a renter’s policy would cover the temporary housing expenses if their rental property were uninhabitable due to a fire or other damage arising from another tenant.
79% assumed that the theft of their lap top, tablet or other electronics were not really insurable except though a “Buyer Protection Plan” offered by the store where purchased.
All of those items are included in a Renter’s policy.
So how much does a Renter’s Policy cost? Like any insurance policy there are many factors that go into determining the price. When packaged with an auto policy, the annual cost us usually $200-250. As a single policy, the annual cost is about $275-300.