Buying vs. renting: How do your insurance needs change? - WTNZ FOX 43 Knoxville, TN

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The home-buying extravaganza caused a flurry of first-time buyers to attain the dream of home ownership, but it was too good to be true. Before long, millions of overextended borrowers began to default on their subprime mortgages, causing the housing market to come crashing to the ground.

For former homeowners, rental properties provide the best housing alternative. But insurance needs change drastically when moving from a home to a rental, and prospective renters should take a long, hard look at their changing insurance needs before they move.

Renters Insurance - What Does it Cover?

Home insurance covers quite a bit. The ceiling, the walls, the television set, the living room furniture-nearly everything is covered. But that's not the case with renters insurance. Renters insurance provides a more narrow breadth of coverage, offering liability coverage and theft or loss protection for a tenant's personal belongings.

But the landlord's insurance will cover everything, right? Think again.  

Many renters believe their landlord's insurance extends to their personal items, but they're mistaken. In most cases, a landlord's insurance will only provide coverage for the unit's structure, not the tenant's personal possessions. Ultimately, it is the tenant's responsibility to insure his personal items against loss with renters insurance.

Imagine this: A faulty electrical outlet sparks a fire in your master bedroom. Before you know it, flames engulf the room and begin spreading down the hallway. Before the blaze reaches the kids' bedroom, you're able to get the entire family outside safely. The fire engine arrives and is able to save most of the kitchen and family room, but much of the rest of the home has been charred to a crisp.

In the situation above, a landlord's insurance would not cover the tenant's losses; renters insurance would be required to replace the damaged property.

Why Purchase Renters Insurance?

Renters often believe they don't have much property worth insuring, but most grossly underestimate the value of their belongings. State Farm reports that the average renter owns roughly $20,000 worth of property that isn't covered by their landlord's insurance policy. Furniture, major appliances, televisions, clothing, footwear, computers, dishware, exercise equipment-how much would cost to replace every item in your home?

Even worse, renters are more susceptible to theft than homeowners. The U.S. Department of Justice reports that renters are 79 percent more likely to be burglarized than homeowners. Despite this fact, fewer than half of renters-43 percent-carry renters insurance.

The good news? Renters insurance is much more affordable than home insurance. According to the National Association of Insurance Commissioners, the average cost of a renters insurance policy is between $15 and $30 per month-less than the phone bill in most households.

The housing crisis has forced millions of Americans into rental properties, and there's no end in sight. But losing your personal possessions because you failed to purchase renters insurance will only add to the tragedy. Shop for affordable coverage today and keep your valuables protected.

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