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7 renters insurance mistakes that can cost you thousands

Imagine you’ve come home to your apartment only to discover that it’s been ransacked and valuable items are missing. Calm down, you tell yourself: At least your renters insurance will cover this break-in and theft. Only you quickly realize, after combing through your policy paperwork, that you first have to pay a pricey deductible, and the chintzy coverage limits won’t reimburse you the full value of what’s been stolen.

Truth is, many leasing tenants have misconceptions about what their insurance will cover and to what extent, and don’t realize the hard truth until it’s time to file a claim. takes a deeper dive into common and costly insurance missteps renters make and how to avoid them.

Mistake 1: Assuming your landlord’s insurance covers your belongings

Many first-time renters take for granted that their personal belongings are covered by their landlord’s insurance. But a landlord’s policy only protects the building itself, not what’s inside your unit.

“A landlord’s policy is there to safeguard the landlord’s property, meaning the structure itself, and that’s where it stops,” explains , a Certified Financial Planner. “Your laptop, furniture, clothes, and other belongings are not on your landlord’s radar. “

That’s why it’s smart to purchase your own renters insurance policy and ensure that the personal property limit matches what it would cost to replace your possessions.

“A typical renters policy runs $12 to $20 a month for $20,000 to $30,000 of personal property coverage, plus liability. That’s less than most people spend on streaming services,” notes personal finance expert with SuperMoney.

Mistake 2: Not understanding what renters insurance actually covers

Getting a renters policy is only the first step. You also have to dig into what is spelled out in the policy. Not knowing what’s covered and to what amount can result in major frustration when you need to file a claim, but soon learn you’re not protected like you thought you were.

“Renters insurance generally covers personal property, some liability if someone gets hurt in your space, and, in many cases, additional living expenses if you are displaced,” continues Kovar. “What it often doesn’t cover, for example, is flooding or earthquakes, and many policyholders don’t find that out until they are already dealing with the aftermath of a loss. It’s worth taking a few minutes to actually read through what you have so that you’re not surprised later.”

Mistake 3: Skipping a home inventory

Many renters don’t take the time to create a record of what they possess to substantiate their ownership and what they paid. That’s a big mistake, according to , insurance analyst for The Zebra.

“Without photos, videos or receipts, it can be difficult to prove what was lost during a claim, which could lead to reduced payouts or delays,” she says. “Conducting a simple video walk-through and taking photos of belongings can help avoid this issue.”

Mistake 4: Using actual cash value instead of replacement cost

Actual cash value (ACV) — which is the default coverage in most basic renters policies — pays what your items are worth today after factoring in depreciation. Case in point: If your three-year-old TV is stolen, a policy with ACV will compensate you only for what that used TV is worth right now. If you wanted the claim to pay you the cost to purchase a brand-new television, you would instead need replacement cost coverage. For better peace of mind, consider upgrading your policy to the latter.

“The replacement cost upgrade is typically only $2 to $5 more per month, which for most renters is a no-brainer,” adds Latham.

Mistake 5: Not factoring in the deductible

Another common oversight renters make is only focusing on the monthly premium and forgetting about the deductible, which is the amount you must pay out of pocket before insurance coverage applies.

“This could be a problem if your loss is smaller than the deductible and results in no payout. Choosing a deductible that is affordable in an emergency can help prevent this issue,” suggests Swanson. “You can also typically adjust your deductible for lower monthly payments, but make sure you can cover that deductible cost if you increase the amount.”

Mistake 6: Overlooking coverage limits on high-value items

Standard policies often include limits on high-value items like expensive electronics, jewelry, collectibles, and musical instruments, which can result in only partial reimbursement following a loss.

“If your engagement ring is worth $7,000, your policy may only pay, for example, $1,500 if it disappears, even though your policy states that contents coverage is $30,000,” Latham cautions.

Fortunately, many insurers offer what is called a rider or scheduled personal property endorsement, which allows you to add specific items with their own separate coverage amounts.

“It’s usually not expensive to add a rider, but you do have to ask for it,” says Kovar.

Mistake 7: Waiting too long to document or report a claim

There’s usually a limited window of time in which to take action on the loss. After all, the longer time passes, the fuzzier your recollection of the theft and loss can be, and the less legitimate your claim can appear.

“Get in touch with your insurer sooner rather than later,” recommends Kovar.

Action steps after a theft

To improve your odds of being properly reimbursed by your insurer, as well as finding and prosecuting the thief, be sure to:

1. File a police report within 24 hours. “Insurance companies typically require official documentation of the incident before processing a claim,” Swanson notes.
2. Report the loss and file a claim with your insurer within 48 to 72 hours.
3. Gather and submit documentation to your assigned adjuster that supports your claim, including a list of stolen items, photos or videos, receipts, and a copy of the police report.
4. Await a response from the adjuster, who will review the claim to confirm the loss is covered and calculate the payout based on your policy’s coverage type and deductible.
5. Receive payment if the claim is approved, which could be provided in one or more installments. “Most theft claims settle within 2 to 4 weeks,” says Latham.

The bottom line

Take the time to carefully review and, if necessary, upgrade your renter policy’s coverage, limits, and deductible to avoid regrets if and when it’s time to file a claim related to a theft or other loss. Remember that the homework you complete now can prevent a lot of headaches later.

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