These days, rent is expensive — the median value for a one-bedroom apartment in the United States is more than $1,200. In 2018, the average salary for a full-time employee came to $857 per week. Many experts recommend that you spend a maximum of 30 percent of your income on rent. So, if you live in an area where you can't afford your own place, then you might need a roommate. It's a great way to save money, but it also means you have to consider the costs of living together. One of these might be the cost of renters insurance.
Roommates always need renters insurance. Most often, it is best for all roommates to get policies separately from one another. While sharing a policy is possible in some cases, individual roommates can see benefits from getting separate coverage.
Coverage Within Renters Insurance
Most landlords require all tenants to buy renters insurance. They do so to help ensure that renters can take care of themselves should a problem occur in the property.
Renters coverage helps the landlord avoid certain liabilities incurred by leasing the property. More importantly, it provides renters financial recovery in the event problems occur. Coverage can include:
- Liability Insurance that covers a renter in the event they cause property damage or bodily injuries to third parties — such as neighbors, guests or even strangers on the property.
- Possessions Insurance to insure the possessions that belong to the tenant. Since tenants don't own the rental property itself, they won’t have to insure the structure itself.
- Loss Of Use Insurance to help cover a tenant's living costs if they have to move out of the property temporarily — such as while it undergoes repairs after a fire or storm damage.
Policies can often insure numerous specialty items and unique risks that you might face within your rental property. The coverage can also usually insure all of the people and possessions within the property. Therefore, it might seem more convenient for roommates to insure all residents and assets on the same coverage.
Yet, looks can be deceiving. Roommates generally are better off buying separate renters policies.
Why Roommates Need Separate Coverage
Suppose that you and your best friend from college move into a two-bedroom apartment to split the cost of rent. You might have great times together, share possessions and think of each other as family.
Still, the you and your roommate aren't family. You are separate, unique individuals. You own separate possessions, pose your own risks to the property (and each other) and you both have separate insurance histories. By trying to insure all roommates on one renters policy, you might actually intertwine separate risks in ways that might prove inconvenient later.
What if your roommate's dog gets into a neighbor's apartment, and causes several hundred dollars of property damage to the neighbor's belongings? The dog, in its excitement, might also bite the neighbor, leading to a lawsuit.
In cases like these, your roommate might be able to file against your renters liability insurance (provided it covers damage caused by a pet) for assistance with legal fees and recovery costs. This is good for them because it can help them cover their own losses.
However, as their roommate, it may not be an ideal situation for you. You are also insured by the same renters insurance policy. Therefore, the liability claim triggered by a roommate's dog (which doesn't belong to you) might still appear on your insurance history well into the future. This might mean that you have to pay more for your insurance in the future, even though you had nothing to do with the claim.
Additionally, when you and your roommate insure all possessions on the same policy, you insure more items. Therefore, you might have to split the settlement cost of a possessions damage claim among yourselves. If you have separate policies, however, each renter can file a claim for their own possessions damage, and therefore have exclusive use of the damage settlement.
As such, it's almost always better for roommates to have separate renters insurance. Policies are often affordable, so you'll almost never have to worry about affording a policy that is exclusively your own.
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