Applications, paperwork, phone calls – let’s be honest, it’s a hassle.
Guess what? Statistically, you’re in the majority! Most Americans don’t have renters insurance.
One of the main reasons people pass on renters insurance is they don’t think their belongings are worth much. But on average, a two-bedroom apartment contains $30,000 worth of stuff. (US News)
For most of us, that’s a hefty chunk of change! If you have an extra $30K laying around, good for you. Otherwise, you may need a little help if something happens to your stuff (…which we hope it doesn’t!). That’s where renters insurance comes into play.
Still not convinced? Take a quick look around your place.
It’s pretty clear that you have tons of stuff you care about: there’s your iPhone, and your laptop of course; but there’s also your TV and bike. Maybe you have a nice camera sitting around along with a sweet new sound system. Oh, and that fancy watch you got for graduation but you never really wear? That stuff all has value, and it adds up pretty quickly.
You want to make sure you don’t undervalue your stuff getting renters insurance because otherwise, you could be left high and dry when disaster strikes. A proper estimate not only makes sense for your wallet, but also goes a long way in providing a little peace of mind for the future.
How to estimate the value of your stuff
Go over these three simple steps that will save time (and money!) later:
1. Take 2 minutes, walk around your apartment, and take a video (or pics) of everything you care about.
2. Make a list of the stuff of everything you just filmed / snapped and estimate how much each thing costs. Here are some helpful hints:
a. If you have receipts, take pics in case you ever have to replace the stuff under warranty or if you have to make a claim.
b. For electronics and more expensive items, it’s important to know the make and model as well as when and where you bought them (Note: try going on Ebay or Amazon to find similar products if you can’t find the receipt).
3. For your shoes, non-electronic kitchen items, and other stuff in bulk, just estimate what it would cost all together.
4. Add this up and voilà! That’s the value of your stuff.
This is more or less how much personal property coverage you’ll need. While basic policies start with $10,000 of personal property coverage, everyone is different and luckily, you can tailor your coverage to your lifestyle. We’ll go into exact numbers in the next section.
How much renters insurance do you need?
Okay, remember amount you calculated above? Add $10,000 on top of that for each member living in your home (including yourself). This should cover furniture, clothing, and smaller stuff. If you love brand names, expensive cookware, and fancy electronics, you may want to consider going with $15,000 rather than $10,000.
This is the amount of coverage you’ll need for all of your stuff (“personal property” in insurance-speak).
Let’s say you own a $1,500 sound system, a $5,000 engagement ring, and a $1,500 bike. Your partner also owns a $2,000 bike and you guys love brand name stuff. The amount you’d want in personal property coverage would look something like this:
$1,500 + $1,500 + $5,000 + $2,000 + ($15,000 * 2) = $40,000
Let’s say you’re a college student… you probably think you don’t have so much stuff. Think again! Your laptop ($1,250), smartphone ($850), bicycle ($1,500), and clothing add up. Your personal property coverage amount would look something like this:
$1,250 + $750 + $1,500 + ($10,000) = $13,500
While some financial planners will recommend rounding whatever number you got to the nearest $10K, just remember that at the end of the day, you should be realistic.
Best practice here is to pay a monthly premium you’re comfortable with but also take into account how much you can afford to pay out of pocket later.
This little trick may help: if you lost everything today (worst case scenario, we know!), how much would you be able to pay out of pocket? If the answer is lower than the number above, you may want to think about more coverage. If it’s more, go lower.
A note on high-value items
Sub-limits are one of the biggest (unknown) things people miss when signing up for a renters insurance policy.
What’s a sublimit? Well, basic insurance policies will cover around $1,500 or $2,000 worth of valuable items (fine art, some jewelry, bikes, cameras, and musical instruments). However, it’s most likely your high-value items will be worth more. That’s fine – it just means you need to add on some extra coverage to take into account the full value of those items.
As add-ons to your renters insurance, these usually translate into a few extra dollars (or less) on your premium each month.
You know how much your stuff is worth… now what?
So how much time can you spare? Three minutes? That’s all it takes to get at least some peace of mind.
The cost of renters insurance each month is actually less than what you might spend on coffee each day. It’s less than your Netflix subscription! Really.
Be proactive and don’t wait for a bad reason to start thinking about something that could save you thousands of dollars and a whole lot of headaches.
And while we’re talking… about that retirement plan…
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Liked this article? Check out some more nuggets of insurance wisdom over at #Lemonade101.