You need renters insurance, even if you rent with other people — but do you need your own?
Renters insurance is one of the most affordable types of insurance you can buy — and one of the easiest to understand, too. (Read more about how renters insurance works.)
One thing that has the potential to make it complicated? Sharing it with roommates.
Read on to find out:
There are several reasons why you may choose to share a renters insurance policy with your roommates — and most of them are based on incorrect assumptions:
You assume that only one renters insurance policy is allowed per home (False.)
You assume that only one renters insurance policy is needed per home (False.)
You assume that your name has to be on the lease in order to buy renters insurance (False.)
You assume that if you’re living somewhere temporarily you can’t get renters insurance (False.)
You assume renters insurance is too expensive (False.)
Let’s talk through the upsides and downsides of sharing a policy.
There is really only one upside to sharing a renters insurance policy — cost savings. But with the cost of renters insurance dipping as low as $10 a month (sometimes even less), this one really doesn’t make up for all of the downsides (see below).
Roommates technically can share renters insurance, as long as all of the roommates are named on the policy. But it’s not a good idea, for several reasons.
1. Multiple people can make filing a claim very complicated. Who talks to the insurer? Who files the claim? Even buying the policy can be more complicated, because everyone’s stuff isn’t worth the same amount. If one roommate has all thrift-store furniture, while another stocked up at Design Within Reach, splitting a policy 50/50 doesn’t make sense. But what’s the right formula? And what do you do if someone moves out?
2. No matter how many people are on the policy, there are limits on categories for each claim per incident. For example, many policies only cover up to $2,500 for electronics, meaning that even if each of you lost a $2,000 laptop in a fire, the policy would only pay out a max of $2,500, which you’d have to split.
3. Your insurance record follows you around. If you share a policy and your roommate files a claim that doesn’t involve you, that claim would be on your insurance record and could influence your insurance costs in the future. And not just by a little bit — your insurance record could follow you way down the line when you’re applying for homeowner’s insurance, and past claims could mean premiums that are hundreds of dollars higher. Sharing an insurance history with someone is akin to sharing a credit score — would you want to give your roommate access to that?
We realize not everyone is going to follow our very excellent advice that every roommate should get her own renters insurance policy, so if you do decide to share a policy, here’s what you need to consider:
1. Make some lists. The first step in buying renters insurance is to make a home inventory. Each roommate needs to have her own home inventory, which lists everything you own and estimates the cost of each item. A home inventory helps you decide how much coverage to purchase and is crucial if you ever need to a make a claim.
2. Choose the right carrier. Once you know how much stuff you have, you know how much coverage to buy. Renters insurance prices can vary widely, so get quotes from several carriers. (If more than two roommates want to share a policy, make sure you choose a company that allows you to add more than one additional name to the policy — some allow just a second name.)
3. Buy the policy — and then get everyone's names on it. One roommate will need to apply and get the policy, and once it's in force, she can add each roommate's name to it (some companies allow this step during application). Without adding the roommates' names, the policy only covers the roommate who bought it, no matter her intentions.
4. Make a plan. Once you have a policy, read about your insurance company’s guidelines for how to file claim, and make a plan for who is charge of filing a claim in case anything happens and how any claim payouts will be distributed. Making a plan now can save you a lot of headaches later.
There is one exception to the roommates-shouldn’t-share-renters-insurance rule: when your roommate is your partner. If you’re in a committed relationship and living together, a lot of the reasons not to share a policy are negated by that commitment. For example, you can probably trust your partner to negotiate the claim process with you, and not to make a make a claim that might hurt your insurability in the future.
Two things to consider when sharing when a renters insurance policy with your partner:
Unless you’re married or officially-domestically partnered, you’ll still need to add your partner’s name to your policy (or have her add your name to hers). Some companies will do this for no extra charge; others will charge a few extra dollars per month.
It’s still important to do a home inventory and ensure that your policy limits are high enough to cover all of your belongings. Pay close attention especially to category limits — you want to make sure that you both are fully covered by the same policy.
Logan Sachon is the co-founder of The Billfold, a groundbreaking personal finance site for millennials that was named one of Time's 25 Best Blogs of 2012. Her work has been published in New York Magazine, Glamour, The Guardian, BuzzFeed and more.