Insurance 101 teaches that a person can only protect and be indemnified for items that they own. This is one of the first concepts taught in any insurance licensing or training class. For renters insurance, the only owned items that can be insured are any belongings that the renter has purchased and placed in their rental apartment or house.
Readers need to understand the value of renters insurance. Many people believe they do not need renters insurance because their landlord carries insurance on the rental property itself. Keep in mind that your renters insurance policy will cover you for your belongings inside the apartment; your landlord’s policy will cover him/her for the actual walls, ceiling, and floor that they own, and use as a source of income by charging you rent. This expert advice will explain what renters insurance does and how it can protect you financially in the case of a total coverable loss.
The most important thing you need to know when purchasing renters insurance is the actual cost of your belongings. Before speaking to a broker, jot down everything you have purchased in your apartment and roughly how much it would cost to replace. The whole purpose of insurance is to fully indemnify you in the case of a covered loss. Knowing the insurable value of the items in your rental is the first step to handling this effectively.
Renters insurance is very affordable. In NY, most carriers require a minimum value of $25,000 on contents in order to offer replacement cost coverage. This is well worth it even if your belongings are less valuable than $25,000. Replacement cost coverage will allow you to collect the full value on your contents in the case of a covered loss without factoring in depreciation. A renters policy with $25,000 in replacement cost coverage can cost an average of $400 per annual term while taking lesser coverage without replacement cost may cost $300. Replacement cost will be well worth it in the case of an unforeseen fire, theft, or other covered loss.
In addition to coverage for replacement of your belongings, another very important factor is liability coverage. This will indemnify you in the case that someone injures himself on your property. This coverage pays for defense cost, negligence, and pain and suffering settlements that can be brought upon by a third party. While you may think only your landlord would be sued, in this day and age when someone hurts him- or herself, everyone gets sued. So make sure you have your protection in place so you’re not stuck paying for an accident out of your own pocket.
While getting renters insurance for cheap is really easy these days, it’s also really easy to be underinsured (or over-insured). What’s the point in getting a great deal on renters insurance when, in the event of total loss, that insurance didn’t cover everything you expected? Talk to an insurance agent or broker who will help you make sure the insurance policy will cover everything in your rented unit. The goal of insurance is to financially indemnify you after a claim event, so that your life continues as if nothing ever happened. An insurance expert will be able to confirm you have the exact coverage you need.
Getting the renters insurance coverage you need can be done with a total value of all your possessions. However, in the event of a loss, you’ll need to file a renters insurance claim. Having a detailed inventory of your items will help streamline the process of filing a claim and getting the replacement items you need. Having receipts for all insured items is ideal, but that’s not always realistic. Take a detailed inventory of the most costly items first and work your way down, taking photos and compiling what information you can on each item. There are software programs and apps that help with this, or you can do it manually. The more information you have for each item, the easier it will be in the claims process. Make sure the inventory list is in a safe place that won't get lost in a fire or other disaster.
Many people often think renters insurance is unnecessary and excessive. People have asked me, “Why do I need to cover my basic belongings in the apartment I’m temporarily renting for a few years?” The answer is simple: renters insurance ranges from roughly $250-$500 per year in premium for $25,000 worth of replacement cost contents coverage with a $500,000 limit of liability. In the case of a total loss, as unlikely as it may seem, the $500 in premium will be well worth it for the replacement of $25,000 worth of electronics, furniture, and clothing. $500 a year won’t bankrupt your investment portfolio; $25,000 can definitely hurt.
Many prospects ask me to lower the content limits to less than $25,000 which excludes them from having replacement cost coverage. While cost savings is important in this industry, protection should comes first--especially considering the low premium for this line of insurance. Lowering your coverage from $25,000 replacement cost to $10,000 may save you $75-$150 per year in premium. That’s a savings of $12.50 per month if your break it down on the high end. That is not worth it for the thousands of dollars you will be short for diminishing coverage in the case of a loss.
Another common misconception is, “My landlord has insurance so why should I?” The landlord’s policy is simply covering the four walls that surround the apartment, the ceiling, the floor, and any built in appliances that do not belong to the tenant. Basically, the landlord is protecting their own investment in the space with no regard for the tenant’s hard-earned belongings. If there is a fire that causes a total loss, the landlord’s policy will pay to rebuild the space, but it will not pay to replace anything of yours--not one item.
Condo and co-op owners insurance is a completely different coverage item from renters insurance, and renters insurance will not work with a condo that you own.
Renters insurance may sound unnecessary or too temporary of a thing to worry about, but it takes care of you and your present situation. As you presently work and save for your future and your retirement, first, protect the assets and items that you currently own. Renters insurance should be a primary part of your protection portfolio if you are a renter of an apartment unit or a house.
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Photo Credits: Meade firefighters help extinguish apartment fire off post © Fort Meade - Flickr.com; Check Man, Cross Man and Jump Man © ioannis kounadeas - Fotolia.com