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If I do not own my home, do I still need insurance?

The Importance of Renter’s Insurance

First, think about what insurance really is.  All insurance is a transfer of risk.  That means I transfer some of my risk to the insurance company when I purchase an insurance product.  If I own a home, my risk is losing the home to fire or tornado.  When I purchase home insurance, I now transfer that risk to the insurance company.  They become responsible for replacing my home.  If I drive a vehicle, I risk injuring someone and being responsible for their medical bills.  When I purchase insurance, I transfer that risk to the insurance company.  They become responsible for paying the medical bills I caused.

 What are my risks if I do not own a home and rent instead?

 There are two important risks if we rent the place we live. First, if our home or apartment burns down or blows away, we would lose all the personal property we own.  At first glance we may not see just how big of a risk that is.  Imagine today we had to purchase every shirt we have acquired.  Imagine we had to replace every TV, computer, or electronic device we purchased over the last 10 years.  What if you had to replace every dish, cup, utensil?  Imagine replacing every pen, desk, coffee table, dresser, and bed.  Of course, we could go on and on.  This is a large risk we face when we rent.  The building owner would replace the home or apartment, but we would have to replace all our own contents.  Renter’s insurance allows us to transfer that risk to the insurance company.  

 The second risk is liability. If we are negligent and someone is hurt at the place we live, that person could sue us for their bodily injury. This risk has even greater potential to harm our long-term financial plans.  If a renter is found responsible for someone’s bodily injury without renter’s insurance, that renter could be required to pay hundreds of thousands of dollars in medical bills.  This risk is the reason many apartment complexes require a renter’s insurance policy from tenants.  Many customers hear the apartment complex say, “You must have an insurance policy for at least $100,000”.  Sometimes that is confusing because you may wonder “why does the apartment complex want me to have $100,000 in contents coverage if I do not even have $100,000 in contents?”  The apartment complex is requiring the second form of risk, liability, because they want to make sure their renters have coverage in attempt to try to protect themselves from large liability claims.  

The transfer of these two important risks is why every renter should have renter’s insurance.  It may be required at an apartment complex but should be purchased if we rent from landlords or even live in a family-owned home.  This important policy could protect our financial future.  Renter’s insurance is one of the least expensive polices of protection we can purchase.


Content provided by: Casey Ryals, Hall County Farm Bureau Agency Manager