The Inside Scoop on Renters Insurance and Roommates

By Arthur Murray

If you dream of owning a home someday, it’s likely you’re renting while you save for a down payment and establish a credit history to get yourself on track. And if you’re like many renters, you’re splitting expenses with a roommate so you can save for the future.

Whether that rental is a house, apartment or town home, you need renters insurance. Don’t fall into the trap of believing that your landlord’s insurance will protect you. Your landlord’s insurance only protects him or her – meaning that it helps the landlord if fire, wind, hail or another covered peril causes physical damage to the structure of your rental home.

However, it doesn’t offer any help for you if, for example, all your belongings are ruined in a fire. Even if you’re trying to cut costs to save money, this isn’t a good place to skimp. Any savings you might accrue by rejecting renters insurance would be quickly exhausted if you had to buy a new television or laptop because yours got damaged when the tenant in the apartment upstairs flooded your place when he left the bathroom faucet on.

In addition to covering your belongings, renters insurance usually offers liability insurance, which will help with legal and/or medical costs if someone is injured on your property and you’re held responsible for the injury.

For example, suppose you own a dog and it bites a visitor. The average dog bite payout, according to the Insurance Information Institute (III), is more than $27,800.

Once you decide you want renters insurance, it’s time for the next challenge: Convincing your roommate about the need for coverage.

Factors to consider

The first step is to figure out the value of your possessions, which will affect the amount of coverage you want. The best way to do this is to conduct a home inventory, moving from room to room and documenting your possessions – with photos and receipts when available – and recording their value.

You’ll also need to decide whether you want to insure your belongings for their actual cash value, which takes depreciation into account, or for their replacement cost, which doesn’t. For example, say you bought a television five years ago for $500 and it was destroyed by fire. Under an actual cash value policy, you might receive $200 to replace the set; under a replacement cost policy, you’d receive the full $500 (once your deductible is met).

How to get renters insurance with a roommate

There are three likely scenarios, each of which could require a different strategy. You could be renting with a spouse, significant other or good friend, or a stranger you connected with on a website such as Craigslist. Here are some suggestions on how to proceed with each.

  • Spouse. This is the simplest scenario. The two of you likely would purchase a policy together once you agree on policy limits, deductibles and other factors. Both names should appear on the policy to make sure all your possessions are covered.
  • Significant other or good friend. In many states, you could follow the same path as with a spouse and purchase a policy together with both names on the policy. This only works if there are a maximum of two unrelated people covered – additional roommates would need separate policies. The roommate doesn’t have to be on the lease to be on the policy. One thing to understand: Any check for a claim will be made out to both roommates on the policy, even if only one suffers damage. If you want to avoid this, each roommate should have his or her own coverage.
  • Stranger. Separate policies probably make the most sense here, simply for the claims payout. Here’s another thing to keep in mind: Standard renters policies typically don’t cover theft by a roommate, even if he or she is on the same policy.

And now for the best part

Renters insurance isn’t expensive. The average premium, according to the III, is only about $15 a month. You can save that much by avoiding the coffee shop three days a month.

Otherwise, you could be on your own in replacing your furniture, electronics, jewelry, clothing and other possessions in case of fire, theft or another covered peril. And that would delay your path to homeownership even longer.

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Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

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