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Do tenants really need renter's insurance?

As a tenant, who’s responsible for replacing all of your stuff if it gets stolen or damaged?

What happens if someone gets injured in your rental property and they want to sue you?

These are questions worth asking - and it’s why you should consider taking out renter’s insurance if you’re a tenant.

Renter’s insurance usually covers two things - contents, and legal liability. That means it will replace goods that are stolen or damaged, and will protect you from the huge legal costs if an accident occurs at the property you rent - like if someone falls down the stairs and injures themselves.

Only one quarter of Australians have some form of contents insurance, according to the Insurance Council of Australia. And though you may think legal liability isn’t an issue right now, legal costs can skyrocket extremely quickly!

This is exactly what renter's insurance is designed to protect you from. But many tenants don’t know anything about renter's insurance, what it covers, or if they need it.

So we’ve broken down everything you need to know about buying renter's insurance and why it’s so important.

Ring Ring... [phone is ringing]

Hi! I’m a tenant. Do I need renter's insurance?

Yes.

Really?

Really! Landlords aren’t usually liable for anything that happens to your stuff, even if it’s stolen or there is some sort of natural damage to the property. For example, if there’s a break-in, or a fire, replacing your stuff is no one’s responsibility except yours.

Yeah but like, what are the chances of a break-in?

Well, let’s take a look. We don’t want to be alarmist but the crime rate in Victoria rose by 8% in 2016 - and a lot of that was due to robbery. Burglaries and breaking and entering rose 10%.

And the average cost of a robbery for the victim? Over $5,000.

Given renter's insurance is so cheap (see below) we think it’s well worth it.

Shouldn’t the landlord pay for that? Like, what happens if the roof leaks and damages my computer?

That’s not how the law works. Generally, landlords will take out building insurance to protect their property. But everything inside is up to you.

So, if there’s a leak and your computer is damaged, that would fall under a renter’s insurance policy - many of them have coverage for storm damage. However, the landlord might be liable if they were informed of the leak and didn’t arrange repairs in a reasonable timeframe.

But what if my stuff was stolen because the landlord didn’t keep the property safe?

Good question! Legally, it’s actually quite a grey area. Landlords generally have a responsibility to keep property safe and secure. For example, if the landlord didn’t keep locks on the door and there was a break-in, then you might have a case.

The question is, are you prepared to risk it?

For complete peace of mind that you’re covered in any event, it’s worth considering. Especially, if you have things of high value such as musical instruments, valuable jewellery and expensive electronics.

Okay, point taken. But how much is renter’s insurance? Will I have to give up my smashed avo?

Fear not – your $5 chai latte is safe. Renter’s insurance is actually really, really cheap.

It all depends on how much you want to cover. Typically, a renter’s insurance provider will ask you to give a dollar value for everything in your house – and then the price will be based on that, along with other factors like where you live and what type of property you live in.

We did a quick shop and pulled a quote for a policy that covers $25,000 worth of goods, for a free-standing flat in the popular eastern suburb of Ringwood, Victoria, and an excess of $500.

· AAMI: $161.87 per year
· Allianz: $151.25 per year
· Budget Direct: $189.94 per year
· EBM: $160 per year

Pretty cheap, right? The most expensive option here is only $15 per month and if you have roommates, you can split the bill.

Even if you pay the same amount of insurance for 10 years, you’re only looking at between $1,800 to $2,200. That’s good value considering you’re protecting more than $25,000 worth of stuff!

So I need to add up the cost of everything I own? That will take forever!

It’ll actually take less time than you think.

You don’t need to go through the receipts for everything you’ve ever bought, estimations are fine.

Here’s what you do: set aside 15 minutes. Go through each room and jot down the big ticket items in the room and make a rough guess of what each costs.

Let’s take the bedroom:

· How much would the bed cost?
· What about the linen?
· Your clothes – how much would it cost to replace your wardrobe?

The living room:

· How much did you spend on your 50” 3D TV?
· Do you have an XBOX or a Blu-Ray DVD player?
· Surround sound system?
· What about the couch – how much was that?

As you can see, it can start adding up. So keep a tally and use that figure when getting a quote.

Obviously, the more coverage, the higher the cost – but as you saw, it’s still generally less than $200 a year!

Sounds almost too cheap. What’s the catch?

No catch – just some things you need to be aware of.

Like any insurance policy, you need to be sure of what the policy covers. Most will cover fire and theft, but different policies can cover options including:

· Malicious damage
· Storm and rainwater damage
· Lightening
· Earthquakes
· Accidental breakage of glass
· Flood cover

Each policy is different, so make sure you read the fine print on what your policy actually covers.

And there’s actually one really important thing you should know…

Oh yeah? What’s that?

If you have really really expensive items, like a $5000 bike, then you might need to insure those items separately on your policy.

What? Why?

Because renter’s insurance sometimes puts a limit on each claim. For example, it might say that you can only claim up to $1,000 for each specific item but that doesn’t help you much if you’ve got a $10K Rolex!

This is why a lot of insurance providers will ask you to list out the high value items separately from the general value estimation. It’s definitely worth taking the time to do this to ensure you get compensated for the full amount no matter what gets stolen or damaged.

Okay, well, that makes sense. Anything else I should know?

Not really. Just remember to take a look at your policy every year and make sure it’s up to date – depending on your circumstances you may need to increase your cover limit or reduce it to get a cheaper price. Don’t be afraid to shop around, either, you can always get a better deal somewhere.

[Hang up the phone]... beep beep beep

What's interesting: most tenants don’t have renter’s insurance. Either renters don’t know it exists, or they just don’t think it’s worth it.

Personally, I’d love to see a renter’s insurance policy that would cover you for unexpected things - like a week’s missing rent due to special circumstances, or payment if your landlord terminates the lease early and you have to move.

Are you going to get renter's insurance, or do you have it already?

Figuring all this stuff out is hard work. At Cubbi we try to simplify things for landlords and tenants by doing a lot of the work for you – take a look at how Cubbi makes tenants’ lives easier.