We were recently asked by someone who has Mesa, AZ Renters Insurance whether they could buy insurance that they could use instead of fronting all that money to move into a new apartment. They wanted to know,
Does renters insurance replace your security deposit? It covers damage to the apartment, so it should, right?
Well, does renters insurance replace the deposit that most landlords want?
Renters insurance does not replace your security deposit. We’ll take a look at why, but first let’s take a look at the reason that there’s often some confusion on this question.
Security Deposit Insurance Exists, May Be Right For You
Or, it may not be right for you! It’s the wrong choice for the vast majority of people. Security deposit insurance is tied to the community that you live in, as it’s offered through a bulk deal with the insurer. Generally speaking, security deposit insurance and renters insurance can’t substitute for each other because the security deposit program is not insurance.
To clarify, those security deposit products are regulated as insurance, but they’re not insurance in the sense that your renters policy is. What they’re doing is essentially guaranteeing your performance under the lease. You pay a non-refundable premium. If there are losses which could be claimed under the security deposit when you move out, the landlord can make a claim on the policy.
The problem is, the policy has a limit, just like a security deposit. In other words, the landlord generally can sue you for the amount of damages over and above what they recover on the security deposit insurance, just like they could anyway. You’re also out the cost of the program, it’s not refundable like a deposit would be.
In addition – and this is the worst part for many people – the security deposit insurance company can then sue you for the money they paid out for the damage you caused! They’re agreeing to cover the loss immediately to the property, but the right of recovery for that money then transfers to the insurance company that issued the product.
The insurance company knows much about you, and they will find you. They will get their money from you one way or another. Why? Because they have entire teams of lawyers dedicated to this and it’s part of their business model. Security deposit insurance exists, but it’s not renters insurance and it doesn’t protect you. The only people for whom this product is a good choice is someone who knows that they will not cause damage, that they will pay in full immediately for it if they do, and they would rather have their substantial assets working for them than tied up in a deposit.
Why Doesn’t Renters Insurance Replace Your Security Deposit?
Renters insurance liability is designed to cover large bodily injury or property damage losses caused by your negligence – situations where you knew or should have known better, but just didn’t think about it, in other words. That would be you leaving food on the stove and going out for the evening, or you riding your bike into someone on the street.
Those losses tend to be large, and they tend to impact a number of people. The apartment fire scenario is a good example, and it’s one that can get very expensive very quickly. How much liability do you need on renters insurance? As much as you can get, really. It’s there to protect you from crippling losses that most people just couldn’t absorb, unless they’re a certain real estate guy running for President.
Liability coverage on renters insurance is not designed to cover normal wear and tear, nor things that you do over a period of time that cause damage as a result. Just because you didn’t vacuum the carpet in the two years you lived there doesn’t mean the damage to the carpet falls under liability. You continued to not do it, which caused the loss. That’s also a small loss.
Liability coverage is intended to protect you against significant losses for which you could be sued. That’s why it provides defense coverage under the policy, usually outside of the policy limits. With that in mind, you have a security deposit so that the landlord doesn’t have to sue you for the minor damages that can be expected to occur from living in your apartment.
In addition, negligence is required. You can’t use liability coverage to protect against intentional acts. If your landlord angers you and you throw a bowling ball against the wall a few times and leave a dead rat in the oven before you skip town, those are intentional and malicious acts. There is no negligence involved, and liability coverage always excludes intentional and malicious acts.
They Cover Two Different Things, So Renters Insurance Can’t Replace Your Security Deposit
Renters insurance and your security deposit don’t cover the same types of losses, as you now see. That’s the simple reason that renters insurance can’t replace your security deposit. Whether or not you should take advantage of the deposit insurance programs that exist is up to you, but even then that program does not replace renters insurance. You need a policy that will protect you from significant losses that you can’t afford to pay, and your deposit is not that.
Fortunately, you can get affordable renters insurance easily and quickly. It takes about sixty seconds to get a quote online by clicking above, and you can be covered with just one click more. The average price of a renters insurance policy is about fifteen dollars a month, and some parts of the country can be even less expensive.
Effective Coverage offers the nation's only completely mobile platform to quote and purchase renters insurance right from your phone or tablet in just one minute. Get an online renters insurance quote today and protect your family.
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