No renters insurance? 5 facts you need to know

By Allison Martin/MoneyTalksNews

When I moved into my first apartment several years ago, the landlord mandated that all tenants carry renters insurance. So I enrolled in a plan without giving it much thought.

It turned out to be very valuable when a plumbing problem in an upstairs apartment flooded the closet in my master bedroom.

It's easy to overlook this coverage if it's not required by your landlord. Perhaps it never occurred to you, or maybe you believe some of the myths about it. Or maybe you don't think your possessions have enough value to make it worthwhile.

You're probably wrong about that. Says the National Association of Insurance Commissioners: "Renters' insurance policies can cover everything from electronics to clothing to household appliances. Even a minimal number of items could add up to thousands of dollars' worth of merchandise, which can all be covered in a basic policy."

Here are some additional facts worth knowing if you're still straddling the fence about buying a renters insurance policy:

1. The landlord's policy will not cover your personal belongings

Contrary to popular belief, policies carried by landlords typically cover structural damage to the building and not your personal property.

"After acquiring a rental housing unit, landlords change their insurance policies from a traditional homeowners policy to a rental policy, and when they do that, it only covers just the structure, not the content or any of the tenant's belongings," James Emory Tungsvik, president of the National Association of Residential Property Managers, told U.S. News & World Report.

So don't expect to have your sofa replaced if the living room catches fire.

Your renters policy will also cover theft of your belongings, whether they're stolen from your apartment or from anywhere else.

2. Your coverage likely extends beyond your personal possessions

Your renters policy likely will cover your legal costs if someone sues after having an accident at your place, and it will cover a certain amount of their medical bills.

It also will cover costs if you are responsible for damage to other people's property. A common example offered is when you (or your child) throw a baseball that breaks someone's window. Or perhaps you allowed the bathtub to overflow, causing damage in the apartment below.

3. Renters insurance isn't as expensive as you may think

Thinking the cost of coverage outweighs the benefits? Think again. While the price will vary depending on where you live, the various cost averages we've seen range from $12 to $30 a month, much less than you'd spend to replace your belongings.

When I was renting an apartment, $50,000 of coverage was about $159 annually. As with most insurance policies, the higher the deductible, the lower the premium.

4. Furry friends may hike up the premium

For all you pet lovers out there, especially those who own "aggressive breeds," don't be surprised if you're quoted a higher premium or denied coverage, depending on the dog. Check out this list from Forbes to see if your dog made the cut.

5. Luxury items may not qualify for standard coverage

Insurance providers often place limits on the replacement cost of luxury items such as jewelry, an art collection and other high-end items you may own. Purchasing an insurance rider to cover them may be in order.

How to evaluate policies

When selecting coverage for your possessions, you'll be choosing from two options: Replacement or cash value. The latter is less expensive because it pays out the depreciated value of the goods based on the date the damage occurred.

Once you determine which form of coverage best suits your needs, here are some other important considerations:

  • What are the exclusions, such as damage caused by hurricanes, earthquakes, floods or other natural disasters?
  • Do added safety features, including fire extinguishers, alarm systems and deadbolt locks, reduce the premium?
  • Are relocation expenses covered while repairs are being made to the unit?
  • How does the claims process work?
  • Are bundle discounts available to those who carry multiple policies with the company?

Bottom line: If you skip renters insurance to save money, it could backfire and cost you more in the long run.