Does My Roommate Need Renters Insurance Too?
You may be sharing a space with a friend or two while you’re in college or you may be adulting it after college in a rented home. Or maybe you’re living with a boyfriend or girlfriend and are sharing an insurance policy.
If you bought renters insurance but your roommate did not, there are a few things you need to know.
Let’s say you live in a 2 bedroom house or apartment and you share pretty much everything except what’s in your closet or separate room. But let’s say the pipes burst upstairs and it leaked down into your shared space and destroyed both of your possessions? How would you file this if only one of you is named on the policy?
You’ve been splitting the renters insurance premiums, which are shockingly inexpensive (usually less than $200 a year!). But now that you need to get paid out, it occurs to you that you should have two separate policies. Can you and a roommate share one renters insurance policy or not?
We break down how it all works in easy terms below. But the short answer to a complicated question is this: Everyone living in the rented home should have a renters insurance policy unless you are married or there are dependent children involved. For one thing, claiming the property of a person not listed on your policy is considered fraud. Filing an insurance claim for any property that is not yours is illegal. Another reason is that most insurers want you to have separate policies.
Some insurers allow you to list others on your renters policy but if you ever need to file a claim, there may be trouble. Even if it’s determined that you are within legal rights to claim their property by having that other person listed on the policy, chances are that the limits may not be high enough to cover both of your belongings. Chances are that you’ll be at a loss. Also, only the policyholder’s rate will rise, even if the damages are the other person’s fault.
What Are You Saving?
When you split a home insurance policy in half without listing another person on your policy you’re saving less than $100, which comes out to be less than $50 each-- a year! It’s just not worth it! You may lose much more than that in the long-run if you are unable to claim the personal property of a roommate.
How Your Rate Is Determined
Your renters insurance is rated according to some complex factors and formulas. Most importantly, you should know that only the policyholder is evaluated for risk, even when a roommate is listed on the policy. They are also the only ones penalized. So, if the roommate is the cause of damages that need to be paid out, the policyholder’s claim history will be hurt regardless of who was at fault. Also, that policyholder will be deemed a higher risk from thereon. What that means is a rate hike, not only for renters insurance but perhaps also with home insurance and auto insurance!
If you and your roommate have separate policies and you decide to file a claim for your damaged possessions, you’ll probably see a rate hike due to your roommate’s damages. However, if you can just absorb the loss and decide not to file a claim, your rate will not increase at all.
How Much Does Renters Insurance Cost?
Your policy rate is determined based on the rental unit, its location, claims history, age of the property and more. The rate is also determined by the limits you choose for personal property and liability. A standard renters insurance policy covers personal property up to $25,000 and personal liability up to $100,000. The limits here may not be enough to cover losses for both people, if the damage was severe enough, yet another reason to have separate policies for each resident. $25,000 is not a lot of money if you own lots of expensive equipment or electronics that may get destroyed. It all depends on what you own. Liability claims are filed less often, but if you own a dog that bites someone or if someone gets very hurt in your rented home, damages may be expensive, especially if you factor in ambulance charges and medical procedures.
Important Note on Rate Hikes
Even though renter’s insurance is inexpensive, your rate hike may also be reflected in auto rate hikes and homeowners insurance too, if you buy within a few years. The fact is that property insurance is expensive and you are essentially penalized for filing a claim for years.
What Is Loss of Use Coverage?
Loss of use coverage with a renters insurance policy is coverage that pays for temporary housing if your rented unit becomes uninhabitable. If the damages are bad enough, this type of insurance will cover living expenses.
Compare and Save
You should always compare renters insurance rates before you buy. SmartFinancial can help.
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Really, the best way to determine which policy is right for you is to see how often you think you may need to file a claim. Because an expensive deductible is more difficult to pay, you should not choose the highest deductible if you know you’re prone to break-ins or if the apartment complex you live in is poorly maintained (a faucet leak upstairs from you may destroy all your property).