Editor’s Note: This story was written byLauren Toms from partner site MoneyCrashers.
If you’ve been following the news this year, you might have heard about bank runs: Silicon Valley Bank, Signature Bank and First Republic in the U.S. and Credit Suisse internationally. And it’s understandable if you’re spooked.
A bank run happens when many — if not most — of a bank’s customers try to withdraw their money all at once, either because they’re worried the bank might go out of business or they’ve heard rumors about the bank’s financial health. Bank runs can be very stressful for both the bank and its customers and can have big effects on the economy as a whole.
Fortunately, there are things you can do to protect your money now so a bank run doesn’t ruin your day or your net worth.
Keep your money in a federally insured bank
One of the best ways to protect your money during uncertain times is to keep it in a federally insured bank. That means your deposits are insured up to $250,000 per depositor by the Federal Deposit Insurance Corporation (aka FDIC) or National Credit Union Administration (for credit unions).
If the bank fails, you won’t lose your money so long as you don’t have more than the insured amount in all your accounts with that bank.
To find out if your bank is federally insured, you can look for the FDIC or NCUA sign at your bank or credit union or ask a representative. You can also check the FDIC’s online database, BankFind, to verify if your bank is insured.
Don’t make assumptions. Some banks are uninsured, so it’s important to do your research and ensure your money is protected. Some banks or credit unions may also have private insurance. But it’s not backed by the U.S. government and is subject to the rules of the bank’s underwriter.
In addition to providing insurance for your deposits, using a federally insured bank also comes with other benefits. For example, federally insured banks must comply with certain regulations that protect consumers and promote stability in the financial system. Theoretically, that means that your money is more secure and less likely to be at risk in the event of a bank failure.
Diversify your wealth
Diversifying across different banks and credit unions is an important step to protect your money during uncertain times. That means spreading your money across different FDIC- and NCUA-insured institutions, with no more than $250,000 in each account.
That serves two purposes. One, the more banks you have, the more likely you are to have at least one unaffected by bank runs. They tend to spread, meaning that if one bank starts to fail people start worrying about others, which results in a run on others.
Two, it ensures that if the worst does happen and the bank becomes insolvent, you have a better shot of having at least one bank remain unscathed — meaning you still have money in at least one account to keep paying bills and living life.
And diversification doesn’t just apply to the rich and powerful. Even if you only have a few thousand dollars in the bank, keep it in at least two different institutions. Otherwise, you could temporarily lose access to all your cash between the moment the bank stops processing withdrawals and the moment the FDIC steps in — which can take a few days.
For example, maybe keep half in a longstanding bank like Chase and the other in a neobank like Chime (which importantly has no connection to Chase). By diversifying across different banks, you reduce the risk of losing access to all your money at once.
Stay informed and be prepared
Staying informed about your bank’s financial health is a key part of protecting your money during uncertain times. Regularly check your bank’s financial statements and reports, which are usually available online or in-branch. These reports can give you insight into your bank’s financial performance and stability.
Another way to stay informed is to pay attention to the news and any announcements your bank makes. That can help you stay up to date on any changes or developments that may affect your bank’s stability. But if you hear any rumors or concerns about your bank’s financial health, it’s important to verify them before taking any action.
In addition to staying informed, it’s important to be prepared in case of a bank run. That means creating a plan to protect your money and ensure you have access to funds when you need them.
One way to do that is to keep a small amount of emergency cash on hand at all times. How much you keep depends on what you think you might need, how big an emergency you’re planning for, and whether you have a safe place to keep it.
Some people, especially those with several banks, may just want a few hundred dollars on hand in case there’s an immediate issue. Others may want an entire month’s worth of money in case the worst happens.
But neither of those is a good idea if you don’t have a safe place to store it. Technically, you could use a safe deposit box. But bank branches might close if the bank goes under, severing your access to those funds.
In lieu of that, think of a safe place in your home where you can keep it away from the prying eyes of houseguests and burglars alike. Ideally, it would be inside a fireproof, waterproof safe in case of natural disaster.
Keep calm and don’t panic
During a bank run, it’s natural to feel scared and uncertain. However, panicking can actually make the situation worse and put you at greater financial risk.
One danger of panicking is that you may withdraw too much money too quickly, leaving you without enough funds to cover your expenses and causing any automatic payments to bounce. Additionally, withdrawing large amounts of money can contribute to the bank’s instability and potentially make the situation worse for everyone involved.
To stay calm and make rational decisions during uncertain times, go back to your plan — and maybe even have a backup plan in case it’s worse than you thought or happens faster than you predicted.
One way to stay calm is to focus on the things you can control, such as your own finances and your own actions. That means avoiding rumors and speculation, and instead relying on verifiable facts and information.
Another way to stay calm is to remember the importance of having a long-term financial plan. By focusing on your goals and priorities, you can avoid making hasty decisions.
Final word
Bank runs can be a scary and uncertain time for both banks and their customers. However, by taking proactive steps to protect your money, you can minimize your risk and safeguard your finances.
By taking action now, you can protect yourself and ensure you have access to funds when you need them. Remember, it’s always better to be safe than sorry when it comes to your money.
Inside: The top 10 excuses to miss work. Here are some good excuses to use as cover stories for your absence.
Do you have a legitimate excuse to miss work?
There are many reasons why you may have to miss work. If you’re tired, hurt, sick, or otherwise unable to make it in on time, here are some good excuses to call off work that will help cover for your absence.
Your boss is crazy and your co-workers are pushing you to your limit. In reality, they really just want someone else to shoulder the workload while everyone else takes an easier workload.
If so, do not fear. There are plenty of excuses that can be used by people who really want to take sick days or vacation days off from their jobs.
So, on those days when nothing more than staying in bed sounds appealing, then read through these work excuses for a good time! Some may have believable excuses for missing work and have some fun with them!
Not only do these excuses help cover up the real reason why people are absent at work. We all know the Great Resignation is real and people are tired of working. Do really need reasons to call out of work?
Here are the best excuses for missing work…
What is the best excuse to miss work?
Well, honestly, that is the excuse that won’t get you fired.
Below is a plethora of excuses to use to miss work.
Bulletproof excuses to get out of work
The reality is that most people can’t fully enjoy their life without a job. That’s why many jobs are considered essential, like those at hospitals, fire stations, and police departments. Still others, like working at a coffee shop, are just fun.
But what happens when you have to miss work? The next time your boss is looking for someone to cover and you can’t get out of bed, you’ve got to come up with a good excuse.
If your job is anything like mine, there’s always something that needs to be done. And when I say “needs to be done,” I mean that your boss is probably standing over you while you’re doing it. So when you find yourself in a situation where you have to miss work, the last thing you want to do is give your boss a lame excuse.
So when you ever find yourself in a situation where you need to give an excuse for why you don’t want to go to work, this article will help show some good ways to come up with believable and convincing reasons for why you couldn’t make it to the office.
The top 2 best bulletproof excuses to get out of work are…
Specifically… good excuses to call off work last minute examples…
Excuse #1 – I’m sick.
If you’re not calling in sick very often, try to use other excuses like stomach issues or a high fever. It might be more believable since those are common illnesses.
Excuse #2 – I have a doctor’s appointment.
I have a doctor’s appointment and I don’t need to make up any excuses.
Simply put… there isn’t much you can do in this situation. While your employer would prefer if you schedule the appointment on a non-work day, that always isn’t practical.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
This hilarious coloring book for grown ups will create plenty of laughs all round.
Don’t take out your stress on your coworkers, take it out on this mini punching bag!
Other Good excuses to miss work
One should never be left without an excuse as there are many different reasons why you may want to miss work.
Excuse #3 – Pet emergency
Here is the soft spot for 95% of managers…their pets.
If you have a pet emergency and can’t get to the office, send your boss a message that your pet’s condition is worsening and they need to see the vet right away.
Some workplaces won’t mind if you use personal time for routine checkups on pets. A good excuse to leave work early could be just the thing you need.
Excuse # 4 – My car needs repairs
This is one of the easiest excuses to use, with or without a car. If you’re unable to get your car to the shop for repairs, let your boss know ahead of time and give them an estimate as to how long you’ll be out of work.
This will help ensure that your absence doesn’t cause too much disruption in the office.
For many driving a beater car is the norm, so repairs can continually happen.
Excuse # 5- I need to stay home with my kids because their school is closed
Honestly, this has been more true than ever since 2020!
Parents have experienced swift closures of schools for various reasons. If the kids’ school is closed and you need to stay home with them, that’s a valid excuse to miss work.
In fact, many bosses would understand if you needed to take care of your kids during a natural disaster or another emergency. Just be sure to communicate with your boss in advance if possible, and make up the time later on.
Learn specific good excuses to miss school.
Excuse #6 – I need to stay home with my kids because there is no one to watch them.
While this happens, it is also a warning flag for poor planning to make sure you have secured child care in advance.
While there are certainly valid reasons for wanting to stay home with your kids, please do not use any excuses related to your children if you don’t actually have any. This is dishonest and could lead to negative consequences.
Excuse # 7 – Wifi / Internet Issues
Computer-related issues and wifi problems are the top two reasons to call off work. In fact, according to a survey of 2,000 employees, 60% of professionals identify slow wifi or internet connection speeds as one of their greatest problems.
Workflow is impeded by these types of issues, making it difficult for people to get their jobs done. In some cases, employees have no choice but to take the day off.
This has happened in our household when a city contractor cut our fiber internet line.
Excuse #8 – A family member is in the hospital and I need to be by their side
If you find yourself in a situation where you have to take time off from work to be with a family member who is hospitalized, it’s important to communicate with your boss as soon as possible.
Make sure you know what the company policy is for taking time off and be prepared to provide documentation if needed. Let them know how long you anticipate being out of the office and try to keep them updated on the situation.
While family emergencies happen, be wary if this becomes a common occurrence with different members of your family each week.
Learn more about family emergency excuses.
Excuse #9 – There was a major traffic accident on my route to work and it will take hours to clear the roadways.
If you’re looking for a great excuse to miss work, “traffic” is always a good one.
Whether there was a major accident on your route or the roads are just backed up, it’s easy to say that you couldn’t make it in today.
However, with the availability of news and navigation apps, you better make sure this major traffic accident impedes you from getting to work and there are no other routes possible.
Also, be prepared to work remotely.
Excuse # 10 – Court date
Missing your court date isn’t something you want to do. In fact, this is something you should have planned for in advance by taking time off work.
“Contempt” is a charge for not attending court, and it is punishable by law. So, your court date is more pressing at the time.
You should always try to contact your employer as soon as possible to inform them of the situation.
Excuse #11 – Home Emergency
If you own your home, there are always unexpected issues to take care of. Plumbing leaks, broken windows, and faulty wiring can all turn into emergencies if not taken care of right away.
This is one the good excuses to miss work on short notice.
That’s why it’s important to have a plan for when these things happen. Make sure you have a list of contacts for emergency repairs and keep some money saved up in case you need to pay for them out-of-pocket.
Your boss will understand if you have to miss work to take care of an emergency at home – just be sure to mention the emergency problem when you call in sick.
Excuse #12 – Religious holidays
The holidays we celebrate are a reminder of the holidays and traditions of countries all around the world. The holidays that are recognized are usually the common holidays in the country where you are working.
However, if you are from a different country, you may want to recognize a religious holiday that is sacred to you.
This is a protected excuse to miss work. Just say, “I am observing a religious holiday that does not fall on a recognized national holiday.”
Excuse #13 – Mental Health Day
Mental health days are a great way to take a break from work and relax. Sometimes, we all need a day to just forget about our responsibilities and stressors.
If you’re feeling overwhelmed or stressed, taking a mental health day can be incredibly beneficial for your well-being.
This is a great way to take advantage of your sick time.
Bad excuses to miss work
There are a number of reasons why you might not be feeling like coming in to work.
However, it is important to be aware that some excuses may be less convincing than others. Thus, why below are bad excuses to miss work – these should not be used under any circumstance.
Employers may be less understanding if employees give excuses such as “I don’t feel well” or “I don’t have anything to wear.” Also, employers sense when you don’t feel like coming to work, so they might ask for more of a reason.
Poor excuses will make your manager tired of your absenteeism and might end up asking “What’s your excuse this time?”
Bad idea #1 – Feeling tired
There are many reasons why you may feel tired. Some of these reasons may be valid excuses to miss work, while others will not hold up in a court of law.
If you have been feeling tired and are not well-rested, it is best to explain the circumstances to your manager. This will help them understand why you may not be able to come to work.
If you have reasons to believe that your tiredness is a result of burnout or overwork, you may need to make a plan on how to discuss this with your employer.
Bad idea #2 – I just don’t feel like going in today for any reason.
Instead of saying you don’t feel like going in today, try explaining the situation to your boss and see if they will allow you to use a vacation or personal day instead.
Your boss may require a discussion about why you are feeling overwhelmed or what needs to change at work before granting such permission.
This will lead to longer job satisfaction rather than I hate my job.
Bad idea #3 – Unhappy in your job
If you are unhappy in your job, the first step is to schedule a time to talk to your manager about the issues. You may be surprised at how understanding they can be.
There are many reasons that employees may want to get out of work, but those reasons are inappropriate and could lead to disciplinary action such as termination.
If you have already made up your mind about leaving your job, do not use this as a reason for missing work if you are interviewing for another job. If you are granted an interview for another position, use a vacation or personal day.
Bad idea #4 – I overslept and can’t make it to work on time
There are a lot of excuses people use to miss work, but some are better than others. “I overslept and can’t make it to work on time” is not a good excuse.
And at the very least, buy this alarm clock and admit you messed up.
If you struggle waking up in the morning, then try some of these billionaire morning routines.
Bad idea #5 – I had a fight with my spouse or partner and don’t want to be around people
This is one of the most common excuses for missing work. It’s less documented than other reasons for calling out. Your boss should be understanding because this can happen to anyone.
More often than not, these are the times you need the most support even if it is from your co-workers. Going to work will actually be better for your mindset than staying at home.
However, you should not make up excuses to skip work. You will likely be fired if you use these excuses.
Bad idea #6 – Poor planning
It’s not always the case that an employee has missed work because of a one-time mistake. Sometimes, employees take advantage of sick days or vacation time without having a legitimate excuse. This can be damaging to their career and may lead to disciplinary action.
There are many valid reasons to call out of work, not just personal life. Employees should try to plan their absences in advance when possible, so as not to inconvenience their team or boss.
If there is an emergency situation arises, they should contact their supervisor as soon as possible.
Check the most popular planners to stay organized.
Bad Idea #7 – It’s my birthday and I’m celebrating
“It’s my birthday and I’m celebrating! I hope you don’t mind that I’m taking the day off to spend time with my family.”
This may not go over very well if you didn’t plan to take the time off in advance.
While we all what to be treated like a princess on our birthdays, we still have obligations.
This poor excuse should not be used in order to call in with no advance planned day off. Using bad excuses makes it seem like you’re not taking your job seriously and could lead to negative consequences.
Bad idea #8 – I had an unexpected issue arise at my other job or side hustle
While in reality, this may be true, don’t expect to keep the job you are calling into miss work.
There are always going to be unexpected issues that come up when you’re working two jobs or your side hustle. But, there is a reason you are hustling to make more money fast, so you want to keep both opportunities.
If something unexpected comes up and you can’t make it to work, offer to make up the day. By making a proactive solution to the problem, you are less likely to get in trouble and keep both jobs.
Bad idea # 9 – Have Another Job Interview
There is absolutely no reason to tell your current employer that you are looking and interviewing for another job.
That isn’t their business.
It is important not to tell your manager upfront that you are interviewing for another job. Telling your manager you are feeling tired is generally not considered a good excuse to get out of work.
Bad idea #10 – I had the wrong schedule
Forgetting you are scheduled for work is not an excuse to miss work.
Always call in if you are going to miss work, even if it’s just a teen first-time worker.
Nowadays, companies make it very easy to access your schedule and with everything computerized, this bad excuse won’t work anymore.
Bad idea #11 – I don’t like you
If you are having issues with management, take it up with the HR head of the department or speak with an employment lawyer before taking any action.
Dissatisfaction or arguments at work is unfortunately not a valid reason to take time off from work (unless it’s an emergency).
You must follow the company’s procedures when working with a difficult boss.
What to Say If You Miss Work and Don’t Call
Missing work can be a difficult decision to make, but it’s important to know what to say if you need to take that step.
If you don’t call in, you aren’t making things easy on yourself. You’ll have to answer questions about:
why you didn’t show up for work?
how do you plan to make up the lost hours?
how this keeps happening?
If you’re unable to show up for work and don’t want to call in, there are a few things you should keep in mind.
Employers are Desperate
First of all, employers are much more understanding than they have been in the past.
With the current economy, companies are desperate for employees and will tolerate more excuses than they would have in previous years. However, if your employer has higher standards, then these are suggestions for you to follow if you need to miss work without calling.
This is especially true for part-time jobs and jobs making around $15 an hour.
Apologize
Second of all, it’s always a good idea to apologize when missing work–even if it’s not your fault.
A sincere apology is a rarity in our society and may even help your situation.
Also, showing up for extra work when you missed it is a nice thing to do and can help smooth things over with your boss or coworkers.
Be Honest
Finally, if you are going to miss work and not call, be honest about what happened and how your behavior may have impacted the people around you.
Take the high road and call your employer as soon as possible (preferably before the start of your shift) to tell them what happened. Make sure to tell them and ensure that doesn’t happen again in the future.
Employers are desperate for good workers, so they’re more likely to tolerate poor behavior.
Most Common Reasons for Missing Work
There are many reasons why people might miss work, but some of the most common reasons include traffic, oversleeping, bad weather, and feeling too tired.
Other potential reasons for missing work include forgetting something important, being sick or injured, and having a conflict with your boss.
Whatever the reason may be, it’s important to document it properly so that you don’t get in trouble with your employer. If you have to miss work frequently, talk to your boss about setting up a plan for making up the missed time.
How do I get out of work ASAP?
First and foremost, try to avoid writing long stories or emails when trying to get out of work. This will only prolong the process and may raise suspicion. Keep it short and sweet, and be direct with your boss.
Second, make sure that you have a good excuse.
What If I Need to Take Off in Advance
Times have changed and with the new generation, employers are more flexible when it comes to taking time off from work.
In fact, many employers will now allow employees to take a day off without giving any notice at all! This is a great policy because it recognizes that people sometimes need to take care of personal or family matters that come up unexpectedly.
Of course, there are still some employers who require employees to give advanced notice before taking time off. If this is the case for you, don’t worry–there are plenty of ways to get out of work without getting caught!
Simply contact your boss and follow the procedures to take a sick day, vacation day, or just a non-paid day off.
Which of these Believable excuses for missing work will you use?
Missing work can be a difficult decision, but sometimes it is necessary. If you are feeling sick, please stay home. If you have an emergency, please take the time off to deal with it.
When you must miss work, try to provide a valid excuse that is related to your job.
There are all sorts of excuses for missing work, but some are more believable than others.
The list above includes some bad excuses for missing work that are not considered valid reasons.
Your employer will see you as unreliable if you always find yourself with an alarm clock, car, or babysitter emergencies. If your workplace is too challenging and it’s not worth the health risks associated with being sick while working, it may be time to consider looking for a new job.
Are you going to try one of these work excuses?
Know someone else that needs this, too? Then, please share!!
Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions.
This week’s episode continues our nerdy deep dive into how climate change will affect your money.
Check out this episode on either of these platforms:
Our take
Few people enjoy thinking about home and renters insurance — it’s admittedly not the most riveting subject. But climate change has upended the calculus involved with protecting our home and belongings from natural disasters, and many homeowners and renters are discovering this only after it’s too late. Homeowners in areas at risk for wildfire and hurricanes are finding it harder to insure their homes, while others have learned the hard way that their home and renters insurance does not cover damage from flooding.
In the second episode of our nerdy deep dive into the intersections of personal finance and climate change, NerdWallet insurance editor Caitlin Constantine talks with Nerd Holden Lewis, who covers all things housing and mortgages. They explore the impact climate change is having on home insurance markets around the United States and what that means for prospective and current homeowners. They also discuss the risks of being underinsured and how to make sure you have enough insurance to cover your home and belongings, as well as why you should consider flood insurance even if you don’t think you need it.
Caitlin also speaks with Matthew Eby, founder and CEO of First Street Foundation, a nonprofit research and technology company that has developed a tool to help homeowners better understand climate-related risks like flooding, wildfire and extreme heat. They dig into some common misconceptions about flooding risk and flood zones, as well as some strategies that homeowners can use to better assess their risk and to protect their homes from potential disaster.
More about insurance on NerdWallet:
Sean Pyles: Let’s say a freak storm is headed your way and there’s a chance it could wipe out your home. Homeowner or renter, are you covered? Are you sure?
Holden Lewis: The standard homeowners policies don’t cover floods, and that means that they don’t cover rising water. They do cover falling water. If your roof blows off and rain falls inside, they’ll cover that. But that’s just one type of under insurance that people have.
Sean Pyles: Welcome to the NerdWallet Smart Money podcast. I’m Sean Pyles.
Caitlin Constantine: And I’m Caitlin Constantine.
Sean Pyles: We’re back with episode two of our nerdy deep dive into the broad effects of climate change on our financial lives. Caitlin, I know you’re going to talk about this more in a little bit, but you’ve had your own brushes with housing disaster, right?
Caitlin Constantine: Yeah, so I’ll go into depth in this during the episode, but I lived in coastal Florida for more than 20 years. During that time, I also worked for quite some time in local news. So I’ve lived through multiple hurricanes and tropical storms, and I’ve also reported on the damage that they can cause. And I’ve actually been pretty lucky to have never lost my house, but I’ve seen firsthand how these storms can really cause a lot of chaos and destruction, and how the effects of those storms last for years long after the storm has passed.
Sean Pyles: OK, so can you tell us why we’re doing a whole episode on housing?
Caitlin Constantine: Sure. For most people, their house is their biggest expense, and for a lot of us it’s also our biggest and most valuable asset. And regardless of whether you’re renting or owning your home, it’s usually way up there on the list of things that take money out of your bank account. And the risks around climate change for homeowners are especially fraught because of insurance costs.
Sean Pyles: Right. And it can be hard to fully understand what you need to know about the kinds of coverage and policies that will help protect your assets from climate risk. And, Caitlin, I don’t know about you, but I did not get a Ph.D. in risk evaluation as part of my schooling, and I’m a homeowner.
Caitlin Constantine: And I didn’t either. Although a Ph.D. in risk evaluation might make my job a little easier sometimes.
Sean Pyles: Yeah, I imagine.
Caitlin Constantine: But honestly, sometimes it really does feel like you might need that Ph.D. because climate change is affecting so many parts of our lives, including decisions about where we choose to live. And a lot of it’s really kind of unknown, which is what leads to people having a lot of uncertainty and anxiety around these issues.
Sean Pyles: All right. Well, before we dive in, we want to remind our listeners to tell us what you think. Share your ideas, concerns and hopefully some solutions around climate change and finance with us. Leave a voicemail or text the Nerd hotline at 901-730-6373. That’s 901-730-NERD. Or email a voice memo to [email protected].
Caitlin Constantine: Yeah, I would really love to hear from people who have stories about how climate change or a natural disaster has affected how they think about homeownership and where they want to live.
OK. So our first guest is fellow Nerd, Holden Lewis. Holden covers all things housing and mortgages. Welcome back to Smart Money, Holden.
Holden Lewis: Hey, it’s a pleasure to be here.
Caitlin Constantine: So we’re here today to talk about how climate change is actively affecting the housing market here in the U.S. Clearly, we’ve all seen some of the catastrophic damage from natural disasters like flooding, fires, the tornadoes that have ripped through the Southeast this spring. But can you give us a sense of what’s happening even more broadly? And then we’ll get into some of these details.
Holden Lewis: Sure. If you could move anywhere, it would really be a good idea to consider the role of climate change in where you live, because places all over the country are affected by disasters and that they seem to be exacerbated by climate change. I live on Florida’s East Coast and climate change is at the top of my mind because of hurricanes. Experts have said that climate change makes hurricanes wetter. I think we saw that especially in 2017 when that hurricane hits Houston and just parked itself over there and flooded everything. Hurricanes are just, they’re dropping more rain. And then with sea level rise, storm surges are pushing water farther inland, but storm surge isn’t the only kind of flooding to worry about because heavy rainfall causes rivers and creeks to overflow their banks and that causes flooding. And then there’s something called pluvial flooding, which is what happens when it rains faster than the water can drain away.
But water isn’t the only problem. Because of prolonged droughts, we see more wildfires in the West. They’ve wiped out entire towns and they pollute the air enough to cause danger to people’s health. So there is a lot to consider. And despite all these issues, people are moving into these high-risk areas. We have 40% of Americans live in coastal area. People are moving to places with high and extreme heat like Austin and Phoenix. And 30% of American homes are in wildlands, technically called the Wildland Urban Interface. Those are places that are vulnerable to fires where basically houses are near the woods. So as more Americans live in high-risk areas, they’re in greater risk of losing their property or even their lives because of natural disasters.
Caitlin Constantine: You and I actually both have personal experience with this. You mentioned that you live on the East Coast of Florida. So just tell us a little bit more about this.
Holden Lewis: I’ve lived on the East Coast of Florida since 1999. We’ve been hit by a lot of hurricanes. I mean, there has been a few times when I’ve been able to sit on our front porch while a hurricane blew from the back of the house. So we’re sitting there in this sheltered area. My wife and I are watching entire sections of roof tiles just blow off of houses across the street and just kind of ply through the air like Frisbees.
In our house, we’ve been fortunate. We’ve had several direct heads and some damage to the house, but not a whole lot. The hurricanes do tend to blow down our wood fences. Our homeowners insurance policy has a windstorm rider, which has its own deductible. So you have a higher deductible for hurricane damage. We haven’t had major enough damage to bother with filing a claim, but I’ve spent a lot of hours rebuilding fences in very hot and muggy weather several times. So, Caitlin, you were on the West Coast of Florida, right? What was your experience?
Caitlin Constantine: So, yeah, as I mentioned in our last episode, I lived on the West Coast of Florida for about 20 years, and I left last year. When I lived there, that part of Florida doesn’t get as many direct hits as the East Coast does, but I’ve experienced my share of hurricanes as well. So you mentioned the 2004 hurricane season. We had, I think, four hurricanes crisscrossed the state within a six-week period. And that was actually when I realized that hurricanes were serious business and not just an excuse for a hurricane party. And Hurricane Jeanne, which was the last one, it actually ripped the roof off of my apartment building. And because so many other people had damage at the same time, it took a week just to get a tarp on the roof and it rained before that could happen. And so later that winter, I ended up dealing with mold all over my apartment. And that was not a fun experience.
And then I also went through Hurricane Irma in 2017, and that was probably more significant for us. It tore down my fence and it uprooted some really big trees in my neighborhood, and it left me in my neighborhood without power for a week. And this is in September, so it was getting up to be 90, 95 degrees inside my house. The linemen who rolled up to fix my power, they got the biggest, teariest, sweatiest hug from me that day. I was so thrilled to see them. And by the way, for the folks who are not from Florida who are listening, this is a common pastime for Floridians comparing notes on our hurricane stories. We all do this, right?
Holden Lewis: I have so many. I’ve heard so many.
Caitlin Constantine: Fortunately, like you, I never had to file claims or deal with insurance after any of these storms. But as many people are aware, home insurance costs really recently increased pretty significantly in Florida, and that’s in large part due to damage from frequent severe weather that happens there quite a bit. And so by the time I moved away last year, I was paying $5,000 a year for my home insurance. So with that, let’s talk a little bit about how the insurance picture has changed as the planet warms. So we all know that most people have to get insurance on their homes to get a mortgage, right? Talk us through what that’s for and what climate change has done to the calculations.
Holden Lewis: We tend to think of homeowners insurance as something that pays for home repairs if bad things happen, but it really helps to broaden that view and just to think of insurance as protecting your wealth and your financial stability and really your mental health.
So here’s how it works. Insurance pools risk. What that means is that you and other people each add to a big pool of money. And then when one of those people has damage, that person withdraws from that pool of money. The problem with disasters is that when they’re really big, whether they’re just huge geographically or very severe, that pool of money can end up being drained and then they’re still claimants who still need to draw from it. And that’s happening more and more because of the increasing frequency of climate-related disasters.
And insurance markets have suffered in high-risk states. Look at Florida. The insurance market has had challenges since Hurricane Andrew in 1992, and there’s just not a lot of large insurers who want to write policies in Florida these days. And so that means the rates have just been skyrocketing. Louisiana is grappling with damage from multiple hurricanes in 2020 and 2021. The state recently approved rate hikes of 60% for its insurer of last resort. And you look at California, they’re dealing with all those wildfires that are caused by prolonged drought, which maybe has ended with all the snow this year, but that’s going to cause its own problems. And homeowners who live near wild areas are being dropped by insurers.
Caitlin Constantine: So we’ve got these issues of availability that’s happening in these high-risk states, but we’re also seeing issues around under insurance. People maybe think that they’re covered and they discover that they’re not, or they don’t have the level of coverage that they need to rebuild after a disaster, or maybe they don’t fully understand what their policies cover. It’s not uncommon for people to think that their home insurance policy will cover flood damage when that’s typically not the case.
Holden Lewis: That’s true. The standard homeowners policies don’t cover floods, and that means that they don’t cover rising water. They do cover falling water. If your roof blows off and rain falls inside, they’ll cover that. But that’s just one type of under insurance that people have. One thing to consider is that inflation and the increases in the costs of labor and supplies, that means that a lot of homeowners are underinsured and they don’t know it because they have policy limits that maybe as costs rise, those policy limits aren’t going to cover all the damage that happened.
One other thing is that I hear people say, “If I’m hit by a disaster, I’ll just rely on government grants or federal loans.” Those are probably not going to be sufficient, and that help is going to be slow. So homeowners do have a few tools to help them understand their true risk. The current FEMA flood maps are based on historical data, and that doesn’t account for future climate change impacts and it doesn’t account for flooding that’s caused by extremely heavy rainfall, but it’s a place to start.
Another thing to keep in mind is that many states don’t require sellers to disclose the flood history to homeowners or home buyers. There’s almost no federal involvement in insurance regulation because insurance is regulated by each state. So nongovernment organizations like First Street Foundation are trying to fill in those gaps.
Caitlin Constantine: And that’s actually a good preview for the second half of this episode when we’ll be talking with the First Street Foundation about how people can better assess what their true climate risk is for housing in a given area. So Holden, for those listeners who are thinking that this all sounds a little bit overwhelming, which by the way is a completely understandable way to feel, can we give people some advice for things that they can do right now to protect themselves as much as possible?
Holden Lewis: Yes. The standard advice is to review your homeowners policy every year. In my mind, that’s boring, but don’t feel bad if you don’t do it that often. But really it helps to assess your coverage. And just get questions answered when it’s time to renew that policy. So what does that mean? Well, first, pay attention to the exclusions that lay out what the policy doesn’t cover. Flooding, for example, but also earthquakes and sinkholes. Those aren’t covered. Mold damage, that’s often not covered. Talk to the agent. Find out if you have enough coverage to replace the home and belongings if it’s destroyed in a disaster or even a fire. Ask about coverage for living expenses if you’re displaced and you have to live somewhere else for a while. And are there caps on that coverage? And look into extended or guaranteed replacement cost coverage.
And then there’s also inflation guards that you can have on your policy which adjust your coverage to account for inflation. Both of those are generally going to cost more, but if you can afford it, it might be worth the peace of mind. Just make sure you have additional coverage that you might need. We recommend looking into flood insurance even if you’re not in a place that’s designated a high-risk zone. Flood insurance costs less in medium- and low-risk areas, so it’s probably worth the investment. And then, finally, just think of your contributions to climate change and how you can reduce them. Look for opportunities to decrease your carbon footprint by reducing energy usage like when you replace windows where you add insulation. And consider installing solar panels.
Caitlin Constantine: These are all great ideas and great advice. And as the home insurance editor for NerdWallet, I definitely cannot emphasize the importance of looking into flood insurance enough. There’s one more thing that we also need to talk about, which is the key timing issue on all of this, especially when you’re buying a house. So a lot of potential home buyers, they don’t really think too much about insurance when they’re going through the process of buying a house. They’re focused on the price, they’re focused on getting the mortgage. And insurance is kind of treated as this minor thing to be just checked off the list before closing, but it’s really important to think about insurance from the start to make sure that you’re fully covered should the worst happen.
Holden Lewis: It’s a really, really good point. And it’s especially important if you’re moving from a different part of the country. Let’s say you live in the Midwest or the Northeast and you move to Florida or Texas. You might be shocked at how much it costs to insure the home. What that means is it’s really increasing your monthly house payment, and that might not be something that you’re thinking about when you’re just thinking about the property taxes and the principle and the interest. So get a ballpark estimate of your insurance costs. That way you can factor them into how much you can afford to pay for the house.
Caitlin Constantine: Right. That’s such a great point. I actually read an article about a couple that retired from New Jersey to Florida thinking that they would save money on taxes and insurance, and they were absolutely shocked to find out that wasn’t the case. They saved money on taxes, but what they saved was erased by how much more they were paying with insurance.
So thank you so, so much for joining us and for sharing this really important information with us today. We really appreciate you taking the time to join us.
Holden Lewis: Hey, I appreciate the opportunity.
Caitlin Constantine: So, Sean, I dearly hope that you as a homeowner are more than adequately insured based on what Holden just told us. I know you have a house on the Southwest Coast of Washington state.
Sean Pyles: Yeah, well, I can hear the waves from my house, and I’m embarrassed to say that I do not have flood insurance. But after your conversation with Holden, I’m going to be calling up my agent, I promise. But also, Caitlin, I’m maybe spiraling a little bit about how I’m supposed to evaluate the climate risk around my house.
Caitlin Constantine: OK. Well, I’m going to be following up to make sure that you get flood insurance. But also —
Sean Pyles: Thank you.
Caitlin Constantine: Very important. But also we’re going to get a little bit into how you can better evaluate climate risk around your house with a literal expert on risk assessment. So Matthew Eby is the founder and CEO of First Street Foundation. It’s a nonprofit research and technology company that is all about risk prediction in this time of climate change. It’s developed all these cool mapping technologies that model flood, fire and extreme heat risks all over the country. And those models are integrated into real estate sites like Redfin and Realtor.com, so consumers can look up properties they’re interested in and then make a judgment about future risk.
Matthew Eby, welcome to Smart Money. It is so good to have you with us today.
Matthew Eby: Yeah, thank you so much for having me.
Caitlin Constantine: All right. So we have just heard from my colleague Holden Lewis about all of the negative factors that are affecting housing as we find ourselves in this era of significant climate change. Can you talk with us a bit about what you’re seeing out there and whether it’s as discouraging as it seems?
Matthew Eby: Sure. Well, the top line is the benefit that we have today is that we have data. And so we’re able to understand things that we were not able to before at a property level. So kind of what you might experience or the likelihood, the probability of an event impacting a home. So whether that’s a wildfire or a flood or a wind event or something of that nature is now something that we can understand and plan for. So while these are not great things, it’s very helpful to know what’s happening because what gets measured can be managed, and then you can do things to take proactive steps to ensure that anything that does happen can be offset with, whether it’s a risk transfer product like insurance or whether it’s something that you can do smart with your home, whether it’s elevation or defensible space from fire or a number of other things that you can do to be proactive about it.
Caitlin Constantine: Yeah. A common theme that we’ve heard over the course of this podcast is the uncertainty is a challenge for a lot of people. So your point that we now have data, that seems like it could be something that could help mitigate that uncertainty a little bit.
Matthew Eby: Yeah, that’s exactly what we do at First Street Foundation, is we work with the world’s best scientists and modelers to create transparent and peer-reviewed models that we then turn into tools that you can access free of charge on Risk Factor. So if you go to riskfactor.com, you can actually type in an address and understand what the risk may be to your home today from winds or wildfires or floods or extreme heat, and then how that’ll change over the next 30 years. So understanding that uncertainty or those probabilities and that range of outcomes that could happen really then informs those next steps for you.
Caitlin Constantine: OK. And so when, say, somebody goes and they go to Risk Factor and they put in their address, I know that I’ve done this, I’ve recently bought a house and it gave me factors for flood, extreme heat and fire, how does somebody interpret that information that Risk Factor displays on the screen when they do that?
Matthew Eby: Well, the first thing that you’re going to see is a score from 1 to 10. One being minimal where we don’t identify risk within our models and then 10 being extreme. That score for the perils that you’re talking about is representative of a 30-year ownership period. So we don’t just look at what is the risk today, we say, “OK, if you’re going to own this home for 30 years, how likely is it that you’re going to be exposed to these things that would then be potentially consequential to you?” And so that score is a really indicative of what you need to dig further on.
So if you see one of the numbers kind of above 1, you’re going to want to click in and then know what might happen from those. So if we stick with this flooding example, say you had a flood factor of 5, you would click in and then you could understand what is the actual risk to the building. Is it likely that that water would make it inside the home and cause damage? And then you want to look at other things around, because we always talk about the home may be fine, it may be that 1 like we’re talking about, that great scenario where it’s a minimal risk and we don’t see it, but your neighborhood or your roads or the critical infrastructure in your community may be at risk. Those are all things we also show within the tool. So those scores are the great place to start to know where to dig deeper. But just because you see a 1 doesn’t mean you should also not take a peek around what might be at risk for your community overall and for those other pieces of social infrastructure, critical infrastructure or other residential properties around.
Caitlin Constantine: Right. So Risk Factor is like a starting point. We know that there’s been a lot of discussion about how difficult it can be for people to assess their risk, obviously. One other thing that we have heard as a suggestion is to just go and talk to the people in the neighborhood about their experiences while living there. Does that seem like a way that you can learn a little bit more about what your risk could potentially be?
Matthew Eby: Absolutely. One thing we are always telling folks is that a model is a model and it is not certainty. What you can actually do is look at your, as many models as possible. Or if we were talking about flooding still, talk to your local floodplain manager, talk to neighbors around what you may have seen in the past. The only difficult side with that is that won’t incorporate this idea of what’s going to happen in the future. So we know from carbon emissions to greenhouse gasses that things are getting warmer. We are able to quantify the differences of what will happen in those future scenarios and then understand how that’ll change certain events like flooding and wildfire and heat and hurricane winds and things of that nature. So while the history and the historical events are very important and helpful to know, it’s also important to take all of these pieces of information together to make a very informed decision versus just relying on one of them alone.
Caitlin Constantine: That makes a lot of sense. So we’ve just talked a little bit about where future homeowners should be thinking about when they’re shopping for a house during this time of climate change and uncertainty. Can we also talk a little bit about what you buy? For instance, if you’re buying an older house or if your home has new construction, can you share a little bit about that?
Matthew Eby: Sure. So when you are looking at your property, each one of these risks are going to have different vulnerabilities to that structure. So one thing, as you just mentioned when it was built, means the building code standards were going to be either today’s because it’s a new build or one of the past building code standards that would have different rules about how it must be constructed. And so you’re going to want to look at the age, which is then driver of the building code standard, but then also sync with things like wildfire. For a lot of the homes that are on the West Coast, what are we seeing for what’s called defensible space? So is there a bunch of shrubs around the property or trees around the property? Because that’s really the major driver of what sets so many homes to actually combust, is because fires get so close under those trees and shrubs. So there’s a mixture of not just the structure itself, but also what’s around structure.
Caitlin Constantine: As somebody who just bought a home that’s near a lot of trees, I have been paying a lot of attention to that buffer zone around my home where all the vegetation is because I know that I live in the [Wildland] Urban Interface. So let’s take a bigger picture view of this and talk about what we as housing consumers, do you think that we are actually paying enough attention to climate risk when we’re looking at and thinking about where to live?
Matthew Eby: Unfortunately, it’s not something that is part of every transaction. So there are things like the National Flood Insurance Program and the FEMA flood zones, which give you an understanding of risk from flooding as FEMA sees that. But that is a stationary view of risk. It doesn’t include how this will change in the future. It’s also dependent on when those maps are made and whether they’re even available for your area. And they miss things, like they don’t include basics like precipitation flooding, so they don’t have zones associated with just rainfall flooding, which actually causes so much damage to so many homes each year.
So there’s one issue there with kind of the government standards on flooding and how it doesn’t do that. Outside of that, there’s just not data for other things, like there’s not a data for wildfires at a property level. There’s things from the Forest Service where you can go to wildfirerisk.org and get an idea of your community risk, but it doesn’t tell you about your individual property. So those are the kind of the negatives.
The positive is that data like ours is now being integrated into Realtor.com, Redfin, these types of real estate sites or brokerages like Compass that are where people are looking for homes. So they actually, “While I’m seeing the listing, I can understand the level of risk and then make an informed decision based off of it.” So while we’re making great strides, it’s just not all the way there yet.
Caitlin Constantine: I’d like to shift gears really quick to talk about people who are already homeowners, especially people who already are in high-risk areas, like places that are already seeing rising sea levels or people that are in the [Wildland] Urban Interface where fire risk is more severe. How do you talk to people about managing their risk when they already live in these places?
Matthew Eby: Yeah, I mean, the first thing you can do is just know what your risk is. Talk to your local floodplain manager, talk to your local fire department to understand what might be at risk, what might not be. And then with that knowledge, you can start to put together a plan. Is it just your individual home that’s at risk and you need to think about adaptation, mechanisms, how do you harden your home so that it isn’t as exposed to these risks if they were to happen? Or, once you see your individual home risk, how do you collectively as a community start thinking about it? But it is a collective action that if everyone is willing to, together, do the best that they can to protect the community, you’re going to be in a much better spot than you just trying to do it as an individual.
Caitlin Constantine: So if there was just one lesson that you could have people learn and understand about the risks of owning a home in this time when the climate is changing, what would that one lesson be?
Matthew Eby: I think the thing that people get wrong all the time is probabilities, because probabilities are really hard. And so when you think of a 1 in 100 flooding event, you can’t think of it as “This will happen once every hundred years.” This is a 1% risk today. And then next year you have another 1% risk and so on and so forth. So if you think of that accumulative probability without anything to do with climate change yet, means that 1% event has a 26% chance of happening over a 30-year mortgage. So if you’re planning on living in your home for 30 years and you have a 1% risk, it’s a 1 in 4 chance that horrific event is going to happen to your property. So you have to think of it as, that is a significant amount of risk and you really need to plan like it’s going to happen.
Now, you add in climate to that and it’s 1% today and it’s growing over time. Those probabilities just compound. And so really what you need to be thinking about is cumulative risk with climate change. And so what are my actual odds of this if you’re a probability person, but really just thinking about homeownership as a length of time, not like an insurance policy where you look at risk on a year-by-year basis. Think of it as the homeowner as the period that you’re going to live in it or your whole period of it’s an investment.
Caitlin Constantine: I am really glad that you made that point because I’m not going to pretend like I’m great at math, but I know that this is an ongoing challenge for a lot of people because as you said, they hear 1 in 100, one flood out of every 100 years, and then there’s a flood and they’re like, “Cool, we’re good for the next 99 years.” And as you have —
Matthew Eby: “We’re good to go.”
Caitlin Constantine: Yeah. And as you’ve just stated, that’s actually not how probability works at all.
Matthew Eby: Yeah, exactly. Exactly. Yeah, the unfortunate part with flooding is that something like that happens, literally it could happen the next day. It’s just the lottery. You bought a lottery ticket and there’s a 1 in 100 chance of winning. You won. You buy a ticket the next day. You could win and get the exact same thing with flooding. But whereas something like wildfire is a little different because it needs fuel to burn. So once it burns, then everything changes. But that’s also so much more destructive than flooding. So each peril is different, but those probabilities are just so important to understand.
Caitlin Constantine: Matthew, this has been really great. Thank you so much for joining us today.
Matthew Eby: Oh, thanks so much for having me.
Sean Pyles: OK, Caitlin, the first thing I’m doing when I wrap up my work for the day is I’m going to put my property into Risk Factor, and then I’m going to study my home insurance policy.
Caitlin Constantine: That sounds like a fabulous evening. I hope that you’re going to enjoy an adult beverage along with that scintillating plan.
Sean Pyles: Yeah, maybe two.
Caitlin Constantine: I’m kidding, sort of. That’s actually a great plan and something that everyone should do regardless of whether you have an adult beverage with you or not.
Sean Pyles: Yes. So listeners, please put that on your to-do list. You will thank yourself later. But, Caitlin, can you tell us what’s coming up in episode three of the series?
Caitlin Constantine: Well, Sean, a lot of people want to know concrete steps they can take to help fight climate change. And one thing they may have heard about is what’s called ethical investing or ethical banking or ESG or sustainable banking or socially responsible investing.
Sean Pyles: OK. OK, Caitlin, I’m about to call the jargon police. These terms seem slapped together by a marketing team.
Caitlin Constantine: Oh, I agree with that. It is a lot of word salad, and we’re going to actually cut through that salad.
Sean Pyles: OK. I’m going to get a good fork and a good knife and maybe some tongs.
Caitlin Constantine: Yeah. And maybe a nice balsamic vinaigrette to go on top of it when you’re done.
Sean Pyles: Yes. Yes. All right.
Caitlin Constantine: So yes, but we’re hoping that this will give folks better tools as they’re making their decisions about how they can save the planet.
Spencer Tierney: We have to be honest with ourselves that our individual impact isn’t going to change the world on its own. It’s really going to be a group effort to create systemic solutions to climate change. And the more people who choose a bank based on its sustainable focus, the more of a hold sustainability will have in the banking industry.
Caitlin Constantine: For now, that’s all we have for this episode. So do you have a money question of your own? Turn to the Nerds and call or text us your questions at 901-730-6373. That’s 901-730-NERD. You can also email us at [email protected]. Also visit nerdwallet.com/podcast for more information on this episode. And remember to follow, rate, and review us wherever you’re getting this podcast.
Sean Pyles: This episode was produced by Tess Vigeland and Caitlin Constantine. I helped with editing. Sarah Schlichter helped with fact checking. Kaely Monahan mixed our audio. And a big thank you to the folks on the NerdWallet copy desk for all their help.
Caitlin Constantine: And here’s our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and it may not apply to your specific circumstances.
Sean Pyles: And with that said, until next time, turn to the Nerds.
Whenever we talk about home improvement, décor, and other aspects of construction, we regularly use home improvement terms like home or building remodeling, renovation, and restoration. And while we tend to use them interchangeably, that shouldn’t be the case.
As you might guess, the three terms all bear different meanings, yet are closely related to each other, which often creates confusion. In this guide, we’ll go deeper into their meaning and compare these three home improvement terms for you to know exactly which one to use, and when.
Overall, these terms are normally used when a property or a housing unit needs a tune-up. It could be damaged by natural disasters or simply needs an update to make it look presentable and functional for the next homeowners or renters.
Restoration, renovation and remodeling are three projects that aim for one goal — to restore or improve a home. Now, let’s clarify them a little further.
What’s a renovation?
Building renovation refers to the process of making an object (a home or any other type of establishment) look and function like new. The process focuses on making use of what is already present and readily available, fixing it, and adding new items for maximized comfort and functionality.
This makes the renovation the most affordable option, when compared to remodeling.
As some project managers would describe it, renovation takes creativity and a great deal of resourcefulness. Moreover, it proves to be more cost-effective than remodeling, making it more appealing among homeowners with have limited financial resources.
Renovations and restorations usually go hand in hand. Let’s say that you have a house with a bathroom with cracked walls and filled with rusty showerheads. You restore the bathroom to its original condition and renovate it by adding a new bathtub and other items to make it look modern.
What’s a restoration?
From a historical viewpoint, a home restoration is when you recreate the look to match its original form, in all its glory. For example, if the home initially had a blue interior, you’d want to restore it with blue paint. Likewise, if it had a Victorian feel, you’d want to buy pieces that match.
Restoration can be compared to the process of maintaining the property from its original state so that gradual deterioration won’t be noticed. This method can be used when your water system gets destroyed by a natural disaster. Or when fire or a flood has taken a toll on your home’s beauty. In most cases, you’d need to hire professionals like asaprestoration.net to help you with the restoration process.
Of the three processes, home or building restorations can be the cheapest. In addition, it requires less energy for conceptualization and the actual process itself. It doesn’t require a hectic level of manual labor that other types of home improvement projects come with.
What’s remodeling?
The most tedious and daunting process of the three is home or building remodeling. It involves taking a worn-out property and reimagining it into a more modern or functional one.
Most remodeling projects entail fairly complex work like expanding the property, removing, gutting or adding walls, and adding cooling/heating systems. Among the three, remodeling is deemed the most expensive, as you’ll need new materials and additional items to complete the project, more time to finish, and a lot of people to help accomplish your vision.
According to established project managers and contractors, it is best to assess whether you have the funds for remodeling and if you do, ask for a cost estimate so you can agree to a remodelling contract that’s within your budget. Don’t forget to set aside a contingency fund for unexpected problems.
Now that you have a clear idea of the difference between remodeling, restoration, and renovation, you can carefully assess what project to undertake to achieve your house goals. Take into account the property’s condition, your financial resources, and your vision to make sure you’re spending within your means and still get the results you want.
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As a renter, your landlord may require purchasing renters insurance as part of your contract. But even if not required, a renters policy can provide an extra layer of protection for your personal belongings, as well as financial liability if someone is hurt in your home. To make renters insurance work for you, learn how much renters insurance you need and what coverage options are available.
How much renters insurance do I need?
Experts recommend purchasing enough renters insurance to help you replace all of your personal possessions if they are stolen, lost or damaged.
A good way to figure out the value of everything you have is to create a list, or inventory, of all of your possessions and include dates of purchase, serial numbers, appraisal documents and any receipts. Use your cell phone or an app to take photos and save your inventory so that you can add to it if you make any new purchases. Include all expensive items and electronics, including computers, devices, home security systems, jewelry, instruments and any appliances you’ve purchased. Use the internet to identify what it would cost to replace those items, and then use that result to decide the minimum amount of renters insurance coverage you need.
If you have a large dog or a specific dog breed, you may need to purchase additional liability insurance.
How much does renters insurance cost?
According to the latest data available from the Insurance Information Institute (Triple-I) the average cost of renters insurance is $174 per year, or about $15 per month.
What affects the cost of renters insurance
While the annual cost of renters insurance may be relatively low , several factors will ultimately determine how much your renters insurance policy costs. These include considerations for:
ZIP code
Credit score
Home inventory
Deductible
Rental size
Actual cash value (ACV) vs. replacement cost value (RCV)
Security and fire systems
Pets
Discounts
There may also be other factors that influence your rate, such as the insurer you choose and amount of liability you opt for. By considering factors such as these, you could begin receiving quotes based on your personal selections for a personalized rate.
Is renters insurance worth it?
What does renters insurance cover that makes it worth the cost? It typically includes personal liability protection to pay for attorney fees and damages or medical treatment for someone who is hurt in your rented home, apartment or condo. The liability protection will likely include no-fault medical coverage so that if someone is hurt on your premises, they can submit their medical bills and expenses to your insurance company and you can prevent a lawsuit.
Renters insurance also covers your personal possessions if they are damaged in a covered natural disaster or stolen. It may also reimburse you for items that are lost and stolen from your car or when you are away from home.
While some people may assume that their personal belongings are not worth an additional monthly cost, it may be worthwhile considering the cost of replacing those items in unplanned circumstances that cause damage. You might own a small wardrobe and a few decorative items, for instance, but a theft could cost you upwards of $1,000 for your home office set-up between your television and electronics. This and similar scenarios are why insurance experts recommend insuring your personal property. Renters insurance also generally covers additional living expenses in case you are displaced by a fire or another covered scenario that makes your rental unlivable.
How do I calculate renters insurance coverage?
Determine your desired deductible
The deductible of your renters insurance policy is that amount that you would be responsible for paying before the insurance company covers the rest of the cost. For example, if you have a $500 deductible and you filed a claim for damage from a fire, you would pay $500 towards the repair and the insurance company would pay the remaining cost. The higher the deductible, the lower your insurance premium, but make sure that it’s an amount you’d be comfortable paying out-of-pocket at any time.
Decide if you intend to purchase additional coverage
You can check whether your financial and personal possessions are sufficiently covered if you are affected by a disaster or involved in a lawsuit. If you do not think you have enough coverage on your renters insurance policy, you can also purchase an umbrella policy. This is an additional liability insurance policy that covers you when you reach the limit on your renters or auto insurance policies, and it also covers you for libel and slander.
Off-premises coverage for travelers
If you travel, it might be worth checking that you have off-premises coverage to insure possessions (such as a laptop or cell phone) that you take with you when you travel with the same coverage that you would have if you were using them at home.
Consider adding a floater
If you have expensive items or one-of-a-kind, collectible items like sports memorabilia, original artwork, antiques, expensive jewelry or furs, consider adding a floater to your renters policy. The floater adds additional coverage for more expensive items if they’re lost, damaged or stolen.
Double check your policy for additional living expense coverage
If you live in an area where there are natural disasters like fires or severe thunderstorms, it could be important that your policy includes enough insurance for Additional Living Expenses (ALE). Additional living expenses include paying for a hotel, eating at restaurants and other expenses from having to live away from your rental home while it is being repaired.
Insurers will pay the difference between your regular living expenses and your added living expenses from being displaced after a covered event, but they may only do so for a limited time. Read the fine print to make sure you have enough coverage for any anticipated future disaster. Also, consider checking that your insurance covers things like floods because not all policies cover every type of natural disaster. Flood damage is usually excluded from standard renters insurance policies, but may be purchased either through your provider or directly from the National Flood Insurance Program (NFIP).