Don’t rent a home without reading Ramsey’s advice. 

If you’re renting a place to live, it’s important you make sure your housing costs are affordable. To ensure that, finance guru Dave Ramsey advises you to spend a maximum of 25% of take-home pay on your total rent payment. 

When you are looking around for apartments, Ramsey makes it clear that you need to foot the bill for an additional expense beyond just the money you’re paying to your landlord. He said this additional expense should be included in your 25% calculation and you shouldn’t skip out on it.

Ramsey believes this expense is crucial for renters 

Renters insurance premiums are the added cost that Ramsey thinks are a crucial part of your housing costs as a renter. “Your rent payment, including renters insurance, should be no more than 25% of your take-home pay,” the Ramsey Solutions blog reads. 

There are some very good reasons why Ramsey thinks renters insurance is so essential that it should be considered a part of your required housing costs when deciding how much you can afford to pay in rent to stay below the 25% threshold. 

“Having a rental insurance policy will protect you financially if your belongings are lost or damaged in a catastrophe like a fire, storm, or robbery,” Ramsey explained. “Don’t count on your landlord’s insurance — that usually only protects their property.”

Ramsey also explained that renters insurance is a pretty inexpensive form of insurance coverage. Since premiums aren’t very high and you could face serious hardship without coverage, Ramsey said this is definitely “one extra cost you should opt for,” when you’re renting a place to live. 

Is Ramsey right?

Ramsey is absolutely correct that buying renters insurance is important for anyone who is renting a place of their own. 

A landlord’s homeowners insurance policy will cover the structure of the building, but it does not offer any protection for tenants beyond that. And that’s a huge problem. 

If you are renting an apartment, chances are good you keep just about everything you own in it. If it is destroyed for some reason, such as a fire that burns down the building, the landlord’s rental insurance would not cover any personal tenant property. This means a tenant with no renters insurance coverage would need to pay out-of-pocket to replace everything they own.

Since most people cannot afford to just rebuy all of their stuff if a problem happens in their apartment, renters should get insurance coverage to make sure this is not their fate. Renters insurance should typically include liability coverage too, which would pay for legal bills and damages if someone got hurt in the apartment (or was harmed by a renter’s dog) and it was deemed the renter’s fault.

Many landlords also require tenants to have rental insurance, so this is yet another reason to buy a policy — although those who aren’t required to have coverage should still make sure they are insured, too. 

In this particular case, listening to Ramsey absolutely makes sense. Tenants need renters insurance and this cost should be factored in as part of required monthly housing costs when deciding whether rent on a particular property is affordable.