Why Homeowners and Renters Insurance Is Totally Worth It
Not to be reductive, but we’re pretty sure there are only two types of people in the world: the over-preparers and the go-with-the-flow-ers.
For the always-prepared folks, talking about insurance feels like foreplay. (OK, maybe not that far. But close.) If you’re more of a one-in-a-million-chance-this-will-happen-to-me- so-I’m-not-gonna-worry-about-it type, insurance premiums might feel like a scam.
Here’s the truth: If you own a home, you need homeowners insurance. If you rent your place, you need (say it with us) renters insurance. And, quite frankly, you have to have it. Most lenders require homeowners insurance before they’ll approve your loan, and most landlords make insurance a condition on your lease.
That said, we know insurance isn’t the most exciting way to spend your money. So check out these even reasons homeowners and renters insurance policies are absolutely worth it.
#1 Insurance covers nearly every scenario imaginable.
Standard policies cover all types of natural disasters, accidents, and more:
Fire and smoke
Lightning
Vandalism or malicious mischief
Theft
Explosion
Windstorm or hail
Water or steam in certain cases
Hail
Riot or civil commotion
Damage by aircraft (!!)
Damage by car
Volcanic eruption (!!!)
Falling objects
Weight of ice, snow, or sleet
In most cases, there are only three things your policy won’t cover from the start:
Floods
Earthquakes
Bedbugs, mice, or other infestations
For the natural disasters, you can pay for additional flood coverage from the National Flood Insurance Program, and you can add earthquake insurance as an endorsement to your current policy.
#2 Insurance protects your belongings—both precious and replaceable.
A major piece of any homeowners or renters insurance policy is coverage for your possessions. If it’s a covered scenario, your policy will pay to replace all your stuff—furniture, electronics, clothing, towels, jewelry—up to a certain dollar amount.
Insurance providers offer two types of coverage:
Actual Cash Value policies pay to replace your possessions minus any depreciation up to the limit of your policy.
Replacement Cost policies pay the actual cost of replacing your possessions regardless of depreciation.
Clear as mud? Here’s a for-instance: Let’s say someone steals your two-year-old TV. With Actual Cash Value coverage, your insurer pays you what your two-year-old TV was worth. With Replacement Cost Coverage, your insurer pays you what it’ll cost to get a shiny new TV.
While Replacement Cost coverage is usually 10% more expensive than Actual Cash Value coverage, it’s often the better choice. Your insurance provider can help you weigh your options and make a confident decision.
You can also get additional coverage for super expensive items. For your great-grandmother’s engagement ring or $4,000 gaming PC, ask about endorsements. Also called riders or floaters, these are added coverages for pricey possessions like jewelry, electronics, and firearms.
Pro-tip: Create an inventory to get the most out of your coverage. We know this is a pain in the arse, but an up-to-date home inventory will make filing faster, easier, and more accurate. The best way to create a home inventory is by taking video of your stuff. If you want it covered by your policy, document it!
#3 Homeowners insurance covers your actual dwelling.
Snowstorm smash your roof? No problem. Fallen tree destroy a window? Don’t sweat it. High school pranksters go a little too far and spray paint the entire front of your house? Your policy has you covered.
#4 Insurance protects you from lawsuits.
In addition to personal property coverage, your policy should include liability insurance. This covers you against claims resulting from injuries and damage to other people or their property while visiting your home.
Picture this: The handyman trips on a raised edge of your driveway and breaks his hand. Without liability insurance, you could wind up paying out of your own pocket for any court, lawyer, or medical fees related to the accident.
#5 Insurance covers loss away from home, too.
One of the benefits of homeowners or renters insurance is that it protects all of your property, even if it’s temporarily away from your home. Although coverage is generally lower, if some not-so-nice person steals your bike outside of the grocery store, you can still file a claim.
Your liability insurance may also cover damage to other people’s property by someone who lives in your home. Like, if your kids destroy your neighbor’s fancy rug, their claim could be covered by your insurance.
#6 Insurance may reimburse living expenses after an incident.
If your home and/or stuff is destroyed by a covered incident, your policy may pay for you to live elsewhere for a short time. Additional “living expenses” coverage reimburses you for everything from hotel bills to restaurant meals—almost any expense you incur as a result of not living in your home.
#7 Homeowners and renters insurance isn’t as expensive as you think.
Even $1M worth of homeowners liability protection will only cost you $200 to $350 per year. And renters insurance is stupid cheap. Think $15 a month for $130,00 of coverage!
Insurance companies usually take several factors into consideration to determine your annual premium:
Credit score
Claims history
Deductible
Value of personal property
Age and size of your home
Lot size
Building and roofing materials
Additional amenities, like pools or trampolines
Past maintenance, mold, or pest issues
General wear-and-tear of your property
Be sure to ask your provider about discounts for bundling home and auto insurance or for installing extra security measures in your home.
Ok, but what if I’m renting?
Renters or tenant insurance provides the same protections as homeowner’s insurance, other than the structure itself. Your landlord should have insurance to protect the actual building, but they aren’t responsible for anything inside. Because you don’t need coverage for the dwelling, renters insurance is one of the most cost-effective policies you can buy.
Wish you were buying homeowners insurance instead of renters insurance?
We can help! Book a discovery meeting today to get started on your home-buying journey.
