Renters insurance. What do you know about it? I recently learned that if a college bound student is still living with their parents in a dorm room, then the parents homeowner’s insurance will cover if something happens to their possessions. But, if they are renting an apartment, call your insurance agent and ask questions so you know if they are covered or not. However, if something does happen while the student is at college, the homeowner’s deductible has to be met and the claim counts against the homeowner’s insurance.
Renter’s insurance is important, and this column is dedicated to helping you learn more about it. If you rent an apartment or own a condominium, you need insurance to protect your belongings. While your landlord or condo association might have insurance, it only protects the building. Your belongings are not covered under those policies.
There are several types of residential insurance policies. Most policies cover personal property losses from 17 perils, but not floods or earthquakes.
Renter’s insurance for basic $16,000 coverage would cost $12 to $16 a month, between $144 to $192 a year. This is just a starting point to help you understand how easy it is to afford it and how expensive it can be to not have it.
One thing to look at is whether the insurance company will offer “actual cash value” or “replacement cost coverage” for your belongings. As the name implies, ACV coverage will pay only for what your property was worth at the time it was damaged or stolen. So, if you bought a television five years ago for $300, it would be worth significantly less today. While you’d still need to spend about $300 for a new TV, your insurance company will pay only for what the old one was worth, minus your deductible.
Replacement cost coverage, on the other hand, will pay what it actually costs to replace the items you lost. Replacement cost coverage will reimburse you for the actual replacement cost of your property, up to the limit stated in your policy. An insurer will generally make an advanced payment to you for the used value of the property, less your deductible. Then if you replace the property, you can receive reimbursement for the actual price paid. Your agent can explain this part of the claim process in more detail.
Let your agent know about any particularly valuable items you have. Jewelry, antiques, and electronics might be covered up to a certain amount. If you have some items that are unusually expensive, such as a diamond ring, you’ll probably want to purchase a separate rider. If you don’t talk to your agent about an expensive item when you buy the policy, you probably won’t be able to recover the loss.
To ensure you are compensated for any belongings you lose from a fire, storm or other catastrophe, you should inventory all of your personal belongings. Many people learn after a fire or storm that they didn’t have enough personal property coverage. Making an inventory will help you decide how much insurance you need. It also will simplify claims. Your inventory should list each item, its value, and serial number. Photograph or videotape each room, including closets, open drawers, storage buildings, and your garage. Keep receipts for major items in a fireproof place.
If your apartment or condominium becomes uninhabitable due to a fire, burst pipes, or any other reason covered by your policy, your insurance will cover your “additional living expenses.” Generally, that means paying for you to live somewhere else.
Renters and condo owners insurance policies have additional benefits. For example, a waterbed liability provision is standard in most renters and condo owners policies. If your waterbed bursts and the water ends up in the apartment below yours, your insurance would cover the damage.
Liability protection is also standard with most renters and condo policies. This means if someone in your unit slips and falls, you’re covered for any costs, up to your liability limit. If this person sues you, you’re covered for what they win in a court judgment as well as your legal expenses, up to your policy’s limit.
Just like any other type of homeowners insurance policy, your premium depends on a number of factors: where you live, your deductible, your insurance company, and whether you need any additional coverage.
There are ways to reduce your renters or condo owners insurance bill. Increasing your deductible (the amount you pay before your coverage kicks in) is one strategy. Make sure you can afford whatever deductible you choose.
If you’re thinking about getting a dog, you might want to think twice. Some insurance companies are reluctant to write policies for owners of certain breeds.
Most insurers offer a discount for “protective devices,” including smoke and fire detectors, burglar alarms, and fire extinguishers.
Some insurers might offer discounts to policyholders who are over age 55 and retired. Others might offer a discount if you buy both an auto and renters policy (called a multi-line discount).
Please, consider renter’s insurance, even if you think you don’t have much, I think you will be surprised at how quickly it all can add up.