Why you need renters insurance, especially in the military

After retiring from 22 years with the Marines, USAA insurance professional Darrell Gunter has a unique understanding of the importance of renters insurance. "Our military men and women have expensive uniforms and gear, and they're living all over the world," he says. "It's important to know that if something were stolen, for example, it could be replaced — no matter where they are."

According to the Insurance Information Institute, 45% of renters nationwide spend nearly a third of their income just on rent and utilities. "If you are younger and getting started out financially like so many renters are," adds Sean Scaturro, Advice Director for USAA. "It can be difficult to replace expensive items if they are damaged unexpectedly."

Whether you live on a base or post, in a dorm or apartment, or are renting a home, you likely have personal property that's valuable to you. Renters insurance is important because it enables you to repair or replace that personal property if it is covered.

In some cases, personal property is vandalized or stolen, but in others, it's damaged. "Let's say a pipe bursts in your rental," Scaturro says. "Renters insurance can help you replace your belongings, and help offset costs for a hotel stay while repairs are made."

Because renters insurance covers your own belongings — not your roommate's — you may also want to consider liability coverage, which would protect you in the event that someone else's property is damaged or someone else is injured at your house or apartment. "It can help cover you financially if you're found at fault for a person's injuries or damage to their belongings" Scaturro explains.‍ ‍ ^{See note 1}

What does renters insurance cover?

Having renters insurance can make a huge difference in your ability to recover financially if your belongings get damaged or stolen. But renters insurance helps protect your belongings in more ways than you might think.

A peril is what causes your loss or damage leading you to file a claim. Your renters policy will spell out which perils are covered and which aren't.

Depending on your belongings and your living situation, consider a policy that covers the following perils:‍ ‍ ^{See note 1}

• Theft, at home or away from home. It doesn't take a break-in at your rented home or apartment for theft to occur. If you leave your laptop in your car and someone breaks in and steals it, renters insurance helps cover the replacement cost of a new computer. If you're a frequent traveler, be sure your coverage extends anywhere in the world. If your luggage gets stolen at the airport, you want to make sure it's covered, too.
• Flooding. While normal homeowners insurance doesn't include flood coverage, some renters insurance does, at a fraction of the cost. Flooding includes situations ranging from an overflowing washing machine or dishwasher to damage from severe weather.
• Fire. If your belongings are damaged or destroyed by fire and smoke, renters insurance can help replace those belongings.
• Crime. Most crimes across the U.S. are property or theft-related.
• Pets and liability. Pets themselves aren't covered, but cages and other items used to care for your pets may be covered in the event of a loss. Check to see if your renters insurance includes medical expenses and liability protection, so in the unexpected event that your pet bites your neighbor, the associated costs won't derail your financial goals.
• Spoiled groceries. If you have a power failure that causes the food in your refrigerator to spoil, your renters insurance will generally give you a certain amount to replace those items. When you're shopping for a policy, be sure no deductible applies in the case of spoiled groceries.
• Slip-and-fall accidents. If you're entertaining guests at your house and somebody slips and falls, who is responsible for those medical expenses? All policies are different and coverage will vary from company to company. USAA Renters Insurance policies offer a standard $100,000 in liability coverage and $5,000 in medical payments for slip-and-fall incidents and other accidents at your home. Policyholders also have the option to increase their liability coverage; we recommend picking a number that covers your net worth and at least a few years of your annual income to protect against any worst-case scenario.

• Military uniforms and gear. If you're a service member, check to be sure your renters insurance policy covers your unique belongings. See that it offers worldwide coverage for your personal property if you're deployed or while it's in storage. At USAA, we offer coverage for property damage caused by war,‍ ‍ ^{See note 2} and we waive your deductibles if your military equipment is damaged or stolen while you're on active or active reserve duty.‍ ‍ ^{See note 3}
• Musical instruments. As long as your musical instruments aren't used for your profession, they're covered under renters insurance. Most policies cap the replacement cost at a certain amount in your residence and another away from home, so if you're earning a living through your musical talents, it's wise to look into a commercial property policy. Sports equipment follows the same guidelines regarding a hobby versus occupation.
• Collectibles. Collections are covered, with conditions. The value of special collections can be hard to document, particularly if they're rare. Take digital photos with your smartphone, and keep any receipts or other documentation that could help with your claim in the event of loss. If you're into stamps or have heirloom jewelry or other super-special items that would be hard to replace, consider a Valuable Personal Property policy for an extra layer of coverage for your collection.

Replacement cost coverage versus actual cash value

The following two types of coverage are typically available to renters:

• Replacement cost coverage policies reimburse you the amount it will cost to replace your TV with a new one of like kind and quality, making them more comprehensive policies.
• Actual cash value coverage policies reimburse you for what an insurance company estimates your belongings are currently worth — an amount that may not completely replace the loss. For example, that new UHD widescreen TV you bought three years ago for $1,500 might only be worth $1,140 now because of its age and condition.

A third option is liability coverage that protects you financially if you're at fault for something that causes bodily injury to someone else or damages their stuff.‍ ‍ ^{See note 1} Landlords or rental companies may require you to carry a minimum amount of liability coverage with your renters insurance policy. "A good rule of thumb is to carry liability coverage that's equal to your net worth, which is your total assets minus your total debt," advises Scaturro.

As with any new expense, you'll want to add renters insurance to your budget. Insurance premiums are based on individual circumstances, including personal risk tolerance and affordability.

According to USAA Renters Insurance pricing data, members can pay as little as $10 a month for $2,500 in personal property coverage and $100,000 in liability coverage.‍ ‍ ^{See note 4} You may want to have more property protection based on what you own or carry a higher deductible to make your premiums better fit your budget. Your policy should be tailored to your financial needs.

It's important to know that the Department of Defense does not include renters insurance premiums as part of service members' Basic Allowance for Housing (BAH).

How much renters insurance do I need?

To determine how much coverage you need, think about how much your belongings are worth. For a two-bedroom apartment, the average amount of coverage needed may be $27,000. Your individual needs may be more or less than the average.

After you have purchased a policy, create an inventory of your personal belongings. To make a record of your possessions, go from room to room in your house and take photos or record a video. Include big items like furniture, art and electronics, as well as clothing, kitchenware, kids' toys and everyday items like paper towels and toothbrushes.

Not only will the photos help you keep track of what you have, but they'll also serve as a guide if you have to find a comparable replacement item later. Email the photos to yourself, and include notes with important brands and models, dates purchased, serial numbers and receipts.

If you're a service member, be sure to include your military uniform and any military gear. If you're not sure how to properly record your inventory of high-value items, speak with your chain of command for advice.

Once you've documented your belongings and emailed the records to yourself, store your inventory and receipts in a fireproof safe or bank safety deposit box.