What Is Tenant’s Insurance and How Does it Work?

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Most tenants are comfortable in the knowledge that their landlord has insurance on the property that they’re renting. What many don’t know is that this doesn’t cover your personal belongings.

The landholder isn’t legally obligated to reimburse renters for any loss or damage they may incur while leasing their premises. Therefore, according to the professionals at bstinsurance.com, it’s vital to have tenant’s insurance to protect your private possessions against disaster or theft.

What Is Tenant’s Insurance?

Also referred to as renter’s insurance, it’s coverage that protects the policyholder’s belongings, liabilities, and, if the option is available, living expenses in case of loss or disaster. It’s open to everyone renting or subletting any form of housing.

Personal Belongings Protection

This type of coverage protects your personal belongings against loss due to the following:

  • Theft 
  • Fire
  • Smoke
  • Lightning
  • Vandalism
  • Explosion
  • Windstorm
  • Specific types of water damage

Photo by Daniel Tausis on Unsplash

When you buy a policy, it’s essential to draw up an inventory of all your possessions with their estimated value. This’ll ensure that you get the right amount of coverage to replace all of your effects, should you need it.

There are two options available:

  • Replacement cost: This is more expensive, but will pay out enough to buy new items at the current retail price.
  • Actual cash value (ACV): This’ll compensate you with the item’s depreciated value when it was lost or destroyed.

Belongings coverage typically doesn’t cover you against floods and earthquakes. This type of protection has to be bought separately or added as an endorsement to your tenant’s policy.

Liability Protection

Tenant’s insurance protects you against liability lawsuits for property damage or bodily injury that may occur on the property due to the renter, their pets, or family members. It’ll cover your legal defense costs up to the limit of your policy. 

It’s essential to ensure that no-fault medical coverage, which allows someone that gets injured to submit their bills directly to your insurer, is part of your protection.

ALE Protection

Additional living expenses coverage will pay for you to live somewhere else after an insured disaster occurred. While your rental home is being rebuilt or repaired, it’ll cover the difference between your regular living expenses and the costs related to temporary accommodation, take-out meals, and other necessary day-to-day needs.

However, your insurer will typically have either a total dollar amount or a time limit that they’re willing to pay.

Why Is Tenant’s Insurance Essential?

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Here are the main reasons why this form of insurance is vital:

  • The landlord’s insurance typically won’t cover any upgrades, such as built-in shelving or cupboards you may have made and paid for in your rental home. 
  • Should you or one of your guests accidentally damage a neighbor’s property, you’ll be protected against potential personal liability claims. It also covers you if someone gets hurt while visiting you.
  • Landholders’ insurance doesn’t cover your personal belongings.

The Bottom Line

Without coverage, you risk losing everything if disaster strikes. Most people will take years to recover from a loss such as this. Furthermore, personal liability claims can financially ruin you. Tenant’s insurance is widely available at a low cost. It’s designed to protect you against various scenarios giving you peace of mind.

Considering the cost of replacing everything you own, paying a small monthly insurance premium is pretty reasonable by comparison.