This time of year it seems like everyone is packing boxes and moving around. Some are getting settled in a new apartment for the school year, others took the summer to find a new city and some took advantage of the season to look into the real estate market. But while homeowners insurance is usually required with a mortgage, not all landlords insist on renters' insurance. Whether or not your landlords requires it, I strongly feel that renters insurance is an important coverage. If you're renting a house, condo or apartment, any insurance coverage that your landlord has will only cover the structure not your things, situations you may be liable for or any rental expenses you may incur if you're unable to live in your unit because of a claim.
So What Do You Need to Know About Renters Insurance?
1) It Covers Your Possessions.
A) How much insurance coverage do I need? The easiest way to do to this is to take an inventory of all of your belongings...and it can also help you in the event of a claim. Go through the items in your home or apartment and estimate about how much each is worth. Then you can come up with a total value for your possessions. We usually use a base of $30,000 for possessions and increase from there.
B) Should I get replacement cost or actual cash value coverage? Actual cash value pays to replace your items, less any depreciation. So if you're old TV is worth $97, the actual cash value policy would offer you $97 towards your new TV. Replacement cost coverage, on the other hand, would pay to replace a TV of "like kind and quality" to the one damaged. Replacement cost coverage is more expensive, but given the way electronics depreciate over time, it's worth the slight increase in premium.
C) What is my deductible, and how does it work? Your deductible is what you pay before your insurance policy kicks in. Say there was a water leak in your apartment and the estimated damage was $1,500. If you had a $500 deductible (the most common with renters insurance) you would pay $500 toward the repairs and replacements, and the insurance company would cover the $1,000 balance (or any balance up to the policy limit). Generally speaking, if you carry a higher deductible your premium would be lower since you are shouldering part of the risk of any claims in your home.
2) Renters Insurance Offers Liability Protection
A) What happens if someone sues me? Like a homeowners policy. renters insurance offers liability protection in the event you are sued for bodily injury or property damaged you, your family members or even your pet caused. Personal liability coverage also covers the costs of defense and damages you would face in court. While most policies start this coverage at $100,000, we usually suggest a minimum liability of $300,000. Your renters policy will also have no-fault medical coverage for injuries sustained by others at your home - such as a sprained ankle on a rickety stair or a slice with a dull kitchen knife. The injured party simply submits the bill, and your policy would pay. It helps quickly resolve medical situations without the hassle of litigation. This coverage is generally between $1,000 and $5,000.
3) Renters Insurance Covers Additional Living Expenses
A) If you can't live in your home after a disaster or claim, your renters insurance can help. If your home or apartment is unlivable after a claim, your policy can cover your housing and food while you wait for your house to be repaired. The most common example is a family displaced after a fire - they need to live a hotel or eat our while their home is being rebuilt. Their policy would cover some, if not all, of these expenses during that time. This is one coverage where you will need to examine the specific policy - some companies offer a set amount of time for this, others offer a financial cap.
As you can see, renters insurance protects some very important parts of your life - your things, you financial assets, and your housing after a claim. This is why I recommend renters insurance to most everyone. If you have any questions, give our office a call, or check out this article from the Insurance Information Institute: http://www.iii.org/articles/renters-insurance-checklist.html.