Even with near record-low mortgage rates, reasonably affordable prices and the carrot of mortgage interest deductions, the National Association of Realtors® (NAR) annual survey found that the percentage of first-time homebuyers dropped to a near all-time low in 2014. Typically, first-time buyers represent about four of every 10 home sales. But in 2014, the rate fell to 33%, second only to 1987. Why? The NAR experts say a persistently weak job market, crushing student loan and automobile loan debt and the inability to scrape together a down payment are keeping first-time buyers out of the market. If you’re still renting for any of those reasons, the last thing you want to do is incur more debt. One surprising way to do that is to take on the expense of monthly renters insurance. Here are four reasons why it’s a smart move.
1.Renters insurance is cheap
As insurance goes, renters insurance is one of the great bargains. You can often get a policy for around $200 or $300 a year and pay it monthly. If you bundle it with another policy, like your car insurance, or enable automatic deductions from your checking account most insurance companies will give you a nice discount. The amount of coverage, the size of the deductible you select and whether or not you opt for a total replacement cost or actual cash value policy will determine your ultimate premium. Total replacement cost pays the dollar amount of the cost to replace your property at today’s prices, regardless of how old it was when it disappeared. Actual cash value policies factor in depreciation and only pay out what the item is worth today.
2.It’s cheaper than replacing your stuff
If somebody breaks in and cleans out your apartment, without renters insurance, you’ll be on the hook for 100% of the replacement cost. Or you’ll be staring at the blank space where your totally cool flat screen used to be until you can afford to buy a new one. You may not think you own a lot, but take a look around and add up what it would take to go out and buy it at today’s prices. Do the math. You can protect your personal belongings for around a buck a day or less — probably way less than what you’re paying for that greasy donut or over-priced cup of coffee.
3.Renters insurance covers more than personal property
Did you know that if somebody visiting your home is injured, he could sue you for the cost of his medical bills? You could also have to pay for any legal expenses. What if you leave the bathtub running and it floods the apartment downstairs? Or you forget to blow out a candle and the fire spreads to the apartment next door? You could be liable for damages to the other tenants’ personal property. If you have renters insurance, you are protected for damages, medical costs and legal expenses up to the limits of your policy. Have you seen what lawyers charge per hour these days? A lot more than you’ll shell out for a year’s worth of renters insurance.
4.Renter insurance may be tax deductible
Do you operate a business out of your apartment or rented house? The IRS allows you to deduct the percentage of total dwelling space that you use exclusively for your business as a business expense. If you’re using 10% of your rental for business, then 10% of your rent and 10% of your rental insurance are deductible. You can either file a Form 8829 and itemize your business expenses or claim the simpler “no-doc” deduction that lets you multiply your home office square footage by $5 and caps your deduction at $1,500, according to TheNest.com.A qualified tax preparer can explain the special filing requirements for this deduction and help you decide which options works best for you.
Shop for renters insurance online
Convinced that having renters insurance is cheaper than winging it? You can get free quotes and compare renter’s policies here.
 B. Martin, “First Time Home Buyer Rates Drop to Near 30-Year Low,” http://www.cbtownandcountry.com/first-time-home-buyer-rates-drop-to-near-30-year-low/
 Tom Streissguth, “The IRS and Insurance Premiums,” http://budgeting.thenest.com/can-claim-renters-insurance-premiums-tax-return-33886.html