The Importance of Renters Insurance
If you live in a rental home or apartment, chances are
you don’t have the proper insurance. Despite the fact that rented homes are
more likely to be burglarized than owner-occupied properties, nearly 60 percent
of renters don’t have a renters policy.
Why does it matter?
“If you rent a house or apartment and think that your
landlord is financially responsible when there is a fire, theft or other
catastrophe—think again,” warns the Insurance Information Institute*. “Your
landlord may have insurance to protect the building you are living in. But your
landlord’s policy won’t replace your personal possessions or pay for your
living expenses while the building is being repaired. The only way to protect
yourself financially against disasters is to buy a renters insurance policy.”
Renters insurance covers your possessions, liability and
additional living expenses. Let’s take a look at these three types of
protection:
Possessions
Standard renters insurance protects your personal
belongings against damage from fire, smoke, lightning, vandalism, theft,
explosion, windstorm, water and other disasters listed in the policy. Floods
and earthquakes are not covered.
To decide how much insurance to buy, you need to know the
value of all your personal possessions—including furniture, clothing,
electronics, appliances, kitchen utensils and even towels and bedding. The
easiest way to figure this out is to create a home inventory, a detailed list
of all of your personal possessions and their estimated value.
There are two types of renters insurance policies for
your possessions:
•
Actual Cash Value pays to replace your
possessions minus an amount for depreciation (the reduction in the value of
items due to age and use) up to the limit of your policy.
•
Replacement Cost pays the full cost of
replacing your possessions (with no deduction for depreciation), up to the
limit of your policy. The price of Replacement Cost coverage is about 10
percent more than Actual Cash Value coverage, but can be well worth the
additional cost.
Note that a standard renters policy offers only limited
coverage for items such as jewelry, silver, furs, etc. If you own property that
exceeds these limits, it is recommended that you supplement your policy with a
floater. A floater is a separate policy that provides additional insurance for
your valuables and covers them for perils not included in your policy such as
accidental loss.
Liability
Standard renters insurance policies also provide
liability protection in the event you or members of your familiar cause injury
to others or damage their property. It
also pays for damage your pets cause.
If you are sued, the liability portion of a renters
policy may pay for both the cost of defending you in court and for court
awards, up to the limit of the policy. Liability limits generally start at
about $100,000. Your policy may also provide No-Fault Medical coverage.
If visitors are injured in your home, regardless of fault, you can submit their
medical bills directly to your insurance company. You can generally get $1,000
to $5,000 worth of this coverage. It does not however, pay medical bills for
your own family or your pets.
Additional Living Expenses
Many people are pleasantly surprised to learn that Additional
Living Expense (ALE) coverage is typically included in a renters insurance
policy. If the home or apartment you are renting is damaged or destroyed and
you need to live elsewhere while it is being repaired or rebuilt, renters
insurance will cover your additional living expenses—namely the difference between
your regular living expenses and the additional costs incurred by having to
live away from your home, such as hotel bills, temporary rentals, restaurant
meals, etc.
Need help
deciding what coverage is best for you? Contact us today!
*Insurance Information Institute,
September 30, 2009
