Almost everyone recommends that you have renter's insurance, but what does that actually mean? Although some people believe that renter's insurance is unnecessary, they couldn't be more wrong. Even if you don't own property such as a house or condo, you still need insurance. Your landlord has their own homeowner's insurance to cover any damage that may occur to their structure, but that policy doesn't cover all of the stuff inside the building. If you are a renter, you need renter's insurance to ease the burden of replacing your possessions in the case of a disaster.

The average person has over $20,000 worth of possessions in their home. If their property is destroyed by fire or water damage, replacing an entire life's worth of belongings can be incredibly expensive.

Most renter's insurance is three pronged, providing liability coverage, protection for renters' belongings, and coverage for additional living expenses if the home becomes temporarily uninhabitable. Sounds good, but that is a lot of insurance talk; let's break it down a little bit.

Liability Insurance

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Liability insurance covers the costs of any repairs needed if you accidentally damage someone else's property. While most property damage is covered by your landlord's insurance, if you are found to be at fault, repair costs could come out of your pocket. For example, if you start a kitchen fire by leaving your stove on overnight, your negligence could make you liable for the costs of fixing the apartment.

Liability insurance can also help cover the cost of medical bills for any guests that may have been accidentally injured while visiting your home. So basically, if a bookcase topples onto your friend during a particularly rowdy dance party, renter's insurance will keep you from paying for their x-rays out of your own pocket. Additionally, if you accidentally leave a faucet on and ruin the floors and drywall in your apartment, renter's insurance can pay for the water damage.

Personal Property

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If your rental property is damaged due to a fire, flooding, or other disaster, renter's insurance will cover the cost of replacing or repairing your damaged belongings. This also covers loss due to a burglary. Typically, personal property coverage insures belongings such as clothing, furniture or electronics. So if a pipe bursts and fries your fancy television set up, or a burglar steals your laptop, or you lose all your possessions to a house fire, you may have some help covering the replacement costs.

However, most renter's insurance policies do not cover damage to property caused by floodwater, earthquakes, mudslides, or nuclear hazards, so if you live in an area vulnerable to any of those risks you may want to add those provisions onto your policy.

The monetary amount covered will vary from policy to policy, and cap off at a certain limit. Before choosing a renter's insurance policy, do a full inventory of your personal possessions and tally up the monetary value of all of your belongings. Most people have a policy that provides at least $2,500 worth of personal property coverage.

If you have particularly expensive items, such as a diamond ring, or an expensive music recording set up, you will want to get individual possession insurance for each item. This additional coverage only costs a few dollars a month, but could save you thousands if your apartment is ever broken into.

In addition, renter's insurance will cover items that are stolen out of your car, though it will not cover damage to the car itself.

Additional Living Expenses

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Sometimes unexpected disasters can render your home uninhabitable. Even if it is not your responsibility to make the necessary changes or repairs, the temporary displacement can be very expensive. Additional living expenses coverage will compensate you for things like hotel bills if your home is damaged to the point it's uninhabitable. If a bug infestation sweeps through your building, renter's insurance will foot the bill for your hotel stay while your apartment is fumigated.

While purchasing renter's insurance is not required by law, some landlords will stipulate in the lease that their tenants must obtain it. Though it may not seem necessary, investing in renter's insurance could help you avoid a major headache down the road. Renter's insurance is relatively affordable, averaging between $15 and $30 per month nationally. The specific rate will vary based on your coverage levels, insurance provider, and location.

Buying renter's insurance isn't fun, but the small amount you chip in each month will save you a lot of heartbreak and money if and when something truly terrible happens. When you are faced with a crisis, you'll be overwhelmed enough without having to figure out how you will pay for everything. Renter's insurance protects you, so that disasters are just inconvenient, not life-ruining.

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