Renters Insurance

Eight Scenarios For Renters- Why Consider Renters Insurance
The Basics Of Renters Insurance
Ten Ways To Save On Your Renters Insurance
Make Sure Your Personal Property Is Protected

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Why You Need Renters Insurance

By Carolyn M. Brown

What if everything you own was damaged, stolen or destroyed? Would you have the thousands of dollars to replace valuable merchandise, such as your clothes, jewelry, computer, DVD player, television, furniture, and stereo equipment?
If your building burns to the ground, your landlord isn't responsible for replacing the charred contents of your apartment.

Whether you rent an apartment, own a condominium or have any rental property, you need insurance to protect your belongings. While your landlord and condo association might have insurance, it only protects the building and not its contents.

US statistics show that that renters experience higher rates of property crime, theft, and burglary than people who own their home. According to Boston-based Homesite Insurance Group, renters are in danger of losing their belongings from vandalism, water damage, fire, smoke, electrical surge, ice, snow, and other perils. Despite the risks, many renters don't have renters insurance.

A consumer survey conducted for the Independent Insurance Agents & Brokers of America (IIABA) found that nearly two-thirds of those living in US rental properties are currently risking severe financial loss by going without renters insurance. A national consumer telephone survey asked 1,000 people living in rental properties whether they had renters insurance: 64.4 percent said "no" and 2.2 percent answered "don't know."

The top reason most people don't think about getting renters insurance is the mistaken notion that the landlord will be held responsible for a loss. But as Doug Culkin, executive vice president of the National Apartment Association, explains, "The landlord's insurance covers the building and the infrastructure of that building, whether it is the elevators, the air conditioning, or the structure itself." Culkin notes that coverage does not extend into the homes of the individual residents and the possessions they maintain in their units.

So if your building burns to the ground, your landlord isn't responsible for replacing the charred contents of your apartment. Likewise, if your house guest trips over your ottoman and fractures his arm, your landlord's insurance on the property won't protect you from liability. Your landlord may be liable for injuries outside of your rental property, common areas such as the lobby or stairs. But once your guest crosses your front door, he or she is your responsibility.

Parents with college-bound children can take some comfort in knowing that students who live on campus are probably covered in terms of their belongings under the college's insurance policy. However, if your kid lives off-campus in an apartment, he or she is probably not covered. You'll want to consider buying renters insurance on his or her behalf.

What about roommates? Even if you're sharing a humble abode with someone else, each person is responsible for getting his or her own policy. You need to get joint renters insurance to protect your personal belongings, especially if your roommate moves out leaving you holding the bag. Animal lovers may want to look into renters policies that specifically protect them as far as their pets are concerned — say, should your lovable pooch happen to bite one of your houseguests.

When you look at the trade-off — paying a small premium for coverage against the cost of replacing what has taken you years to accumulate — renters insurance makes perfect sense. Here are some tips to help you with the process of selecting renters insurance:

Basic coverage

In general, there's a homeowners insurance policy HO-4 for renters and HO-6 for condo owners, which cover 17 types of perils. Renters insurance also can provide additional protection, such as living expenses assistance, personal liability and medical payments coverage. For instance, if your apartment or condominium becomes uninhabitable due to a fire, burst pipes or any other reason covered by your policy, insurers could pay for the cost of you to live elsewhere while your home is being repaired.

Another way renters insurance protects you is in the area of liability — if someone were to slip and fall on your rented property, and then sue you, renters insurance could cover some or all of your legal obligations and help pay for that person's medical bills. Say you live in a zone that is prone to earthquakes or floods, you could get additional coverage to protect against hazards not covered by basic renters policy.

Coverage amount

To determine how much you need, you first need an idea of the value of your personal possessions. The idea is to buy enough insurance to replace everything in your apartment if it's stolen, damaged or destroyed. The first step is to take inventory — it helps to take pictures or even videotape each room, closets, open drawers, and so on. Better yet, keep receipts for all major items you purchase. Granted, many insurance companies place limits on what they will pay for specific items, so you may end up paying for additional coverage to make sure those items are completely insured. For example, expensive jewelry and valuable artwork are not covered under a standard renters insurance policy; you'll probably need a rider or floater to cover luxury items.

Cash value or replacement cost

There are two types of coverage: actual cash value or replacement cost. The former is less expensive. Under this type of coverage, your belongings are valued after depreciation. In other words, the insurance company will take into consideration the age and condition of the stolen or damaged property. A replacement cost policy will pay you to replace your property with the same or similar item at the current market price.

Let's say that you bought your 25-inch television set five years ago for $400; it would be worth less in value today. However, it would cost you that much (or more) to buy a new TV. The insurance company would only pay for what the old one was worth, minus your deductible under a cash value policy. With a replacement policy, an insurer would make an advanced payment to you for the used value of the property, minus your deductible, and then reimburse you the actual price you pay when you replace the property.

Coverage cost

According to the IIABA, the average cost is about $12 a month ($240 a year) for $30,000 of property coverage or content replacement coverage and $100,000 of liability coverage. Your premium will depend on a number of factors, including where you live, your deductible, and your insurance company. The higher your deductible, the lower your premium. Some financial experts recommend getting a $1,000 deductible. If you install protective devices such as fire detectors, burglar alarms and fire extinguishers, you will be able to reduce your premium.

Convinced renters insurance ensures your peace of mind and your prosperity? The best place to start shopping around is by contacting an insurance company you already do business with, such as your auto insurance carrier.

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