Renters Insurance: Can You Afford to Not Have It?

November 13, 2013

Do you rent a house or apartment? Imagine a disaster affecting your home, for instance, a fire or even a leaky roof rendering your home temporarily uninhabitable. Could you afford a lengthy stay in a hotel while the home is being fixed? Think about all the personal possessions that you and your family members own. Would you be able to afford replacing some or all of them?

Most homeowners carry homeowners insurance, and many are required by their lender to do so.  However, according to a 2013 Insurance Information Institute poll, only 35% of renters choose to purchase renter’s insurance.  Renters may be under the impression that the homeowner’s insurance will cover the cost to replace their belongings in the event of a disaster, such as theft or a fire.  But while the homeowner’s insurance will cover damage to the building, in the event of a fire, for instance, it will not cover the cost to the renter to replace their belongings.

According to the Insurance Information Institute, in 2010, the average cost for a renters insurance policy in Colorado was $177 per year.  Compare that with the average homeowners insurance policy cost in Colorado of $926 per year, and renter’s insurance seems like a bargain to ensure that your belongings are protected.  Particularly since, according to State Farm Insurance, the average person has approximately $20,000 worth of personal property to insure.  Spending less than $15 a month to protect yourself and your family from unnecessary hardship can be money well spent.

Know Your Belongings Inside and Out

Renters insurance typically protects your personal property from losses due to theft and vandalism, fire, smoke, wind and hail, and other household occurrences, such as for example, damage due to plumbing or heating system failures. It is important to note that your personal belongings are protected not only in the home, but outside the home or while traveling.  Did you leave your laptop on the table in the coffee shop for “just a second” while getting a second cup of coffee, only to find it missing when you return?  Your renter’s insurance may cover your losses.

Creating and maintaining a list of all your personal property can be a tedious process, but well worth the protection in case a disaster occurs.  Take a detailed inventory of your family’s personal property.  Don’t forget about items out on the porch, the garage, the tool shed, etc.  It may be helpful to photograph key items or take a narrated video of your house or apartment.  A copy of this home inventory should be kept outside your home in case a disaster occurs, for example, in a safe deposit box or a secured virtual cloud.

For a helpful template, the National Association of Insurance Commissioners (NAIC) provides a home inventory checklist you can use to easily inventory your property.  If you prefer to store information on your phone, the NAIC offers a free myHome app for iPhones and androids that you can use as a home inventory tool for insurance purposes.

Also, the Insurance Information Institute offers a Know Your Stuff home inventory tool which lets you store and update your home inventory in a password protected environment.  The tool is available in app-form as well.

What Does It Cover and How Does It Pay?

Remember to inquire whether your renter’s policy provides actual cash value (ACV) or replacement cost value coverage for your possessions.  ACV policies reflect depreciation of the item when reimbursing you for your lost or damaged items.  Conversely, replacement cost policies have higher premiums, but will reimburse you for the cost it would take to replace the lost or damaged item today.  So, if the policy covers replacement cost value, your policy would cover the cost of replacing that expensive television set you purchased five years ago with a television of the same kind and quality. But if the policy covers actual cash value, you may only receive policy coverage for what that television set is worth today, which is likely to be a lot less.

Do you have a rare stamp collection or a pricy laptop? Some high value items that are worth more than your policy coverage limit may require “floater” coverage to be adequately insured.  It helps to keep receipts for these high worth items or get them appraised.

A standard renter’s policy also offers other valuable coverage.  Where will you stay if your home is temporarily rendered uninhabitable?  Renters insurance generally covers additional living expenses you accrue when you can no longer stay in your home due to an event covered under the policy. The costs for a hotel and unexpected expenses such as going out for meals can add up quickly.  Your renters policy may cover these unexpected expenses, saving you and your family a great deal of money.

Renter’s insurance also offers personal liability coverage protection for you and your family in the event someone seeks to hold you responsible for injuries or damage to their property at your home.  For example, if a guest is accidentally injured, a standard policy will include coverage for losses, including medical costs, as well as legal fees.  Policies may also offer identity theft coverage, either included in the policy or for an additional premium amount.

Certain types of losses, for example, due to flood or earthquakes, are generally not covered by renters insurance.  Also, damage to the structure itself is not covered, since such damage would generally be covered by homeowners insurance.

Additional Information

You can find useful information about renters insurance, as well as other types of insurance, at the Insurance Information Institute website .  For information about a particular insurer, including past consumer complaints, visit the National Association of Insurance Commissioners website.  The Colorado Division of Insurance also offers helpful information regarding renters insurance.

This post was written by Julie Borisov from Colorado PERA.

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