We in the tropics know the seriousness of storm systems and the devastation they can bring in the blink of an eye. Hurricane season is usually when talk tends to resurface about the importance of insurance and seeing to it that your insurance policies are up-to-date. And yet, oftentimes we remain chronically underinsured or not insured at all, especially when it comes on to insurance that pertains to the home.

If you’re just embarking on either your homeownership or rental journey there are certain things you need to keep in mind regarding insurance. Importantly, insurance is not simply a formality that should be considered optional depending on the state of your finances; it is an extremely critical aspect of planning your personal finances and building wealth as it is key in safeguarding your assets in the eventuality that something unforeseen happens to you and the place where you live. In other words, insurance provides (1) financial security, and (2) risk mitigation.

If a severe weather event caused significant damage to your building or personal property, without the ability to file a claim, chances are your finances would be unable to handle the costs and thus setting back your other financial dreams.

There are, of course, various kinds of insurance plans to cover the various kinds of risks that you might face. Life insurance policies cover the risk of premature death; health insurance policies, meanwhile, cover medical emergencies; motor insurance plans cover the risk of road accidents or theft of your vehicle; and travel insurance plans cover trip-related eventualities. What we are interested in here is insurance that covers damage to the home and its contents. There are two broad categories: homeowners and renters.

Homeowners’ insurance

Homeowners’ insurance is geared towards covering the cost of the actual building and any associated structures, like a garage, toolshed or washroom, in the event of damage brought on by inclement weather. When taking out a mortgage the owner is usually required to have one and the policy must be paid up in order for a claim to be settled. The amount of insurance generally covers both the cost to replace the home in the event of a total loss and any property the homeowner owns inside it.

Renters’ insurance

But what if you can’t afford to purchase a home just yet? Renters’ insurance, as the name suggests, is insurance that is taken out by someone like you who is renting premises, so it’s concerned with the tenant and his or her personal property inside the building. Some tenants think that the insurance their landlord’s homeowners’ insurance is all that matters. But if the personal property inside the house is yours, and not the landlord’s, you have the sole responsibility of getting your belongings insured.

So, if you rented the house furnished, meaning, everything inside, such as the TV, the stove, the air conditioner, etc, should be covered under the landlord’s homeowner policy. If you rented the house unfurnished, then if there’s damage to your personal property, then that’s your responsibility. If a hybrid situation exists and the house contains some of the landlord’s possessions and some of yours, only the things that are theirs will be covered by homeowners’ insurance; your possessions will need to be covered by renters’ insurance.

Why renters’ insurance is important

Remember, renters’ insurance, unlike homeowners’ insurance, has the added benefit of smaller premiums, if you’re worried you can’t afford to pay your rent as well as a rental policy premium. Also, it’s not just for damage incurred by hurricanes; renters’ insurance also covers theft of your personal property, personal liability damages to, say, workers or even guests, and so on. In some cases, it can even take care of additional living expenses if you have to temporarily relocate.

Much emphasis tends to be placed on insurance for homeowners, but if you’re a tenant you need to know what liability is owned by you. Let’s say the building you’re renting is older, and the homeowner has finished paying mortgage on it. An older building, remember, is more vulnerable and susceptible to bad weather. But it is quite possible that they may have let their homeowners’ policy lapse if they are experiencing financial hardships, especially if the homeowner is a pensioner.

Bottom line

While we know there’s always heavy demand for rental homes and apartments, as a renter, it is always a good idea to consider the insurance status of the place where you wish to reside. The landlord usually has an interest in the person who wants to live in their house, but you also have the right to know about the house they are trying to rent you.