For those who are buying a home and paying off a mortgage, homeowner’s insurance is mandatory, but a rental insurance policy is something that is optional for tenants and those who are renting condos, apartments, houses or other spaces. Although a lot of financial experts will recommend renters insurance for almost all tenants, in some cases, there may be some downsides to purchasing this kind of insurance. Here are some of the disadvantages of renters insurance.
Renters Insurance: What You Pay For and What You Get
According to most renters insurance quotes, the average price of this kind of insurance product is often around a dollar a day, for monthly payments of $30 or so. In the grand scheme of things, this is not a high cost. However, when you look at the cost of rental insurance, you’ll also want to look at what you will get.
One disadvantage of paying for this kind of policy is that you’re very unlikely to use it in any given month or year. Renters insurance is a kind of “catastrophic policy” that provides for the kind of large unfortunate situations that no one is really expecting. That’s not always the case against renters insurance, but it’s something to keep in mind.
In addition, there is the bigger issue of what an insurer will reasonably pay in the event of a claim. When renters look thoroughly at the fine print of a renters insurance agreement, they may see that there are specific requirements for getting a claim paid out. This may include detailed record-keeping on the prices of household purchases that some people may not consider reasonable. Without this kind of documentation, a person with renters insurance still may not get very much compensation in the event of damage to their personal possessions.
Renters also have to look at what kind of events are covered in a policy and what is not covered. Some renters insurance policies do not include things like fire, flood, theft or other situations where the renters insurance policy would be most useful.
Moving Around: Looking at Rental History in Deciding about Rental Insurance
Another downside to renters insurance is that it’s not a kind of insurance product that travels with an individual. Renters insurance is meant to cover a specific space for a specific household. Every time you move, you need to arrange new renters insurance coverage. That’s not a big deal if the household has settled down for long term rental in a location, but for some kinds of renters, such as college students and itinerant workers, this kind of insurance may not seem to make sense, because of all the time that must be spent arranging coverage for each rental location.
Think about the above when it’s time to consider renters insurance, and come to your own conclusions about whether this kind of policy works for you.