NerdWallet: Top Five Reasons Why It's A Good Idea To Buy Renters Insurance

A "For Rent" sign stands in front of a house on May 31, 2011 in Chicago, Illinois. (Photo by Scott Olson/Getty Images) (2011 Getty Images)

One of the main reasons why people don’t buy renters insurance is because they think they don’t have many valuables to insure. But insurers estimate that renters own an average of $20,000 to $30,0000 worth of goods, which may be financially difficult to replace should they get stolen or damaged in a fire.

But being able to replace your possessions is not the only reason why renters need insurance.  Here are five other reasons why renters insurance is a good investment:

It’s cheap

It’s easy to find cheap renters insurance. If you can afford to buy a few coffee drinks a month, you can afford to pay for renters insurance. The average premium is $12 a month for $30,000 worth of property coverage and $100,000 worth of liability coverage, according to the National Association of Insurance Commissioners.

Your premiums will depend on what kind of coverage you want and where you live. If you live in Livingston, NJ, premiums with State Farm can start as low as $8 a month for both a $20,000 or $50,000 policy. However if you live in Santa Rosa, CA, renters insurance with State Farm can start at $10 a month for $20,000 worth of property coverage and $15 a month for $40,000 to $50,000 worth of property coverage.

To find savings, ask for discounts. If you have home security devices or if you bundle your insurance policies with the same company, you’re eligible to get a 20 percent discount with some insurers.

Replace your stolen items—inside and outside your home

One of the biggest benefits of renters insurance is that it will replace your valuables no matter where it was stolen. After all, your possessions are more likely to get stolen when you take them out of the house.

With renters insurance you can have peace of mind knowing that your laptop or cell phone can be replaced if it was stolen from your car — or even while you’re traveling abroad. By paying a deductible, renters insurance is a cost-effective way to replace an expensive item such as a $1,000 bike that was stolen outside your office or café. A replacement-cost policy will replace your possessions in new condition, while the cheaper cash-value policy pays what they were worth when they were stolen or damaged.

Additional Living Expenses

If your apartment becomes uninhabitable due to a fire or other covered peril such as a burst pipe, your insurance will help pay for your expenses to live in a hotel or other accommodation while your home gets repaired. Coverage is typically 20 percent of your renters insurance policy and will be provided for a year or until your policy limit is reached.

Additional living expenses covers for extra costs incurred from your normal standard of living because you had to move out of your home. For example, if it’s more expensive for you to eat out everyday because you don’t have access to a kitchen, insurers will pay for the difference between your normal food bills and your restaurant bills. Insurers will also foot your laundry or kennel bills if they’re additional expenses you incurred for being displaced.

Liability Protection

Renters insurance can cover you for different types of liability. If a friend gets injured in your home while helping you move, it can pay for his or her medical expenses. Or if you were playing softball outside and break someone’s window, renters insurance can help pay for expenses to repair it since it covers your liability for damages to other people’s property.

Dog owners also benefit with liability protection if their dog bites or injures someone at home or while out on a walk. However some policies may have exceptions on breeds they cover.

Identity Theft Recovery

The FTC estimates that 9 million Americans get their identities stolen every year due to spyware, phishing attempts and loose privacy settings on social media sites. Some renters insurance policies include identity theft coverage while other insurers may require you to buy it as an add-on.

With identity theft coverage, your insurer will assist you in restoring your identity by working with credit card companies, credit bureaus and other financial institutions to correct false information and fraud. Identity recovery assistance is usually provided for a year and expenses in recovering your identity is typically covered up to $10,000 or more.

Renters insurance provides a wide range of benefits to protect you in common mishaps as well as catastrophic perils. With affordable premiums, it’s a worthwhile investment to give you peace of mind and financial security from unforeseen mishaps and expenses.

Hannah Kim is a financial analyst for NerdWallet, a financial literacy organization
that helps consumers make smarter financial decisions, whether it’s finding the right credit card, saving for retirement or finding the best car insurance.