We’re often asked, “Why do you need renters insurance?” Usually the question is asked by someone whose landlord is forcing them to buy it, but it also comes from curious people who didn’t even know that renters insurance existed. The question most recently came to us from someone who was looking for Ellicott City, MD Renters Insurance.
Why do you Need Renters Insurance When the Landlord has Insurance?
The landlord has insurance on the building. Any insurance that the landlord purchases is irrelevant to you. You own your property, the landlord doesn’t. You have to cover your property, they can’t.
Many smaller landlords face tight budgets. You can’t be certain that the landlord has the proper insurance on the building. If they’ve let the policy lapse, or if they never converted it to a landlord policy from their homeowners policy, you have a serious risk. Any damage to the building that you’re responsible for, like a fire, wouldn’t be covered by the landlord’s policy in that scenario.
A landlord who has suffered a fire and who doesn’t have insurance or doesn’t have the right coverage will look to anyone they can to be made whole. The natural place for them to look is the at-fault resident responsible for the fire. If that’s you, you can expect them to sue you for those damages. If their policy won’t respond, suing you is the only real option they have to collect on the costs.
When you have renters insurance, you get a defense against that lawsuit. Your policy would also pay for the damage to the building for which you were responsible, up to the policy limit. Why do you need renters insurance? Because lawyers are expensive. The aftermath of an apartment fire or a frozen pipe that you caused would be expensive. Insurance shields you from both risk and cost.
Why do you Need Renters Insurance as a Young Adult?
You might think you don’t have much to lose now, and you might be right. If everything you have is hand-me-downs, what good would renters insurance be as a young adult? Your policy comes with replacement cost coverage. If a fire destroys everything in your apartment, you’ll be able to replace the hand-me-down property with new property of like kind and quality.
Don’t forget that a liability claim against you doesn’t just impact what you have now. It can impact your future earnings and future assets. You might not make much money now, but if someone sues you today all they have to do is wait until you earn more or have accumulated assets they can take. Liability coverage on renters insurance as a young adult is about protecting your future.
Why do you Need Renters Insurance for Your Landlord?
Renters insurance for your landlord is a common request. The property manager wants to know that any accidental damage you cause to the property can be taken care of. Since you’re unlikely to be able to pay for the cost of a fire, they require you to have renters insurance.
Many people think that the landlord’s policy somehow covers their property, as well. This is, of course, completely false. The landlord’s policy covers nothing of yours. But by requiring proof of renters insurance for your landlord, they ensure that you know you have to protect your own property.
Why do you Need Renters Insurance With Additional Insured?
Additional insured is different from additional named insured. An additional named insured is someone who is also insured under the policy just like you. For example, spouses are covered automatically but fiancées are not. You might list your fiancée as an additional named insured so that they have coverage on your policy. That’s a standard practice, and there’s nothing wrong with it.
Some landlords request renters insurance with additional insured status for themselves. That’s a less common practice on Ellicott City, MD Renters Insurance. In fact, the Maryland legislature put forward a bill to outlaw the practice a few years ago. The bill never went anywhere, but that indicates how bad an idea it is to give your landlord renters insurance with additional insured status.
The reason landlords ask for this is so that they can have defense coverage under your policy. Defense coverage is outside the policy limits. If both you and the landlord are sued for something like a slip and fall, your policy might primarily pay for the defense. The potential harm, however, comes in when you cause the landlord to suffer a loss. If your negligence causes a fire and your landlord is an additional insured, they likely won’t be able to collect under your liability coverage because they’re a party to the policy as additional insured.
As a result, you could be on the hook personally for those extensive damages. That’s reason enough never to list your landlord as additional insured.
Any time you ask an insurance question, there are two answers: The short yes or no answer, which doesn’t actually cover the nuances that could be crucial to your coverage, and the longer but accurate answer explaining why and how coverage is impacted. The insurance experts at Effective Coverage can break it down into meaningful pieces to help you understand your coverage and to make good decisions about your policy.
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