Meet Jasmine. Jasmine is a State University junior about to move into her first apartment. Jasmine thinks she has what she needs: everything from books to bed sheets. However, she’s actually missing one thing: renters insurance. Jasmine is stunned. What is renters insurance and why does she need it?


Well, let’s start with the “what”. Like most types of insurance, renters insurance reduces the costs associated with a risk, in this case the risk of personal items being damaged or stolen, in return for a monthly fee called a premium. Not only that, renters insurance can even cover the legal fees and medical expenses that could result from someone being injured in your apartment.


Sounds pretty great right? So how does renter’s insurance work exactly? Well, almost all renters insurance policies work through a deductible and limit. A deductible is simply the amount of money Jasmine must pay per incident before her insurer pays the rest, while a limit is the maximum amount her insurer will pay. For example, let’s say Jasmine’s insurance plan has a $200 deductible and her apartment recently suffered a fire that destroyed $5,000 worth of her personal property.


Under her plan, Jasmine only has to pay the first $200 of that bill; her insurer will cover the rest up to a limit, say $25,000. Jasmine is intrigued. After all, saving $4,800 is pretty compelling. But still, is renters insurance truly necessary? Well, technically, no. Unless her landlord requires renters insurance, and many do, Jasmine can technically avoid the purchase. However, in the long-run, avoiding renters insurance just isn’t a good long-term move.

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One, it’s not that expensive, only about $20 a month, and two, it covers expenses that your landlord just won’t, namely stolen or damaged possessions. So, is avoiding a $20 payment each month really worth the risk of someday being saddled with a massive bill? We think not. Hopefully, you and Jasmine now understand how renters insurance works. Be sure to check out our next video, where you can learn how to actually get renters insurance, and be sure to check out our website, where you can find more educational materials and free recommendations for great renters insurance plans.


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