Much like car and health insurance, renters’ insurance is a key component of general financial protection against the uncertainties and harms that can befall anyone. The details of renter’s coverage are covered here, with a quick overview of benefits, costs, limits, and key steps a policyholder should take to verify that they get the right coverage for their living and financial situation.
The benefits of renter’s insurance are substantial. First, the policy buyer gets protection from liability for personal damage or injury to others that happens on your property. Accidents happen and even the best of intentions can result in substantial costs for a renter if there is substantial property or personal injury related to others that occurs on one’s rented property. Landlords and property management organizations have similar insurance, but their coverage does not extend to the private square footage in which a renter lives.
Also, damage to one’s property because of many – but not all – types of “acts of God” such as fires or theft, is covered by standard rental insurance. Damage to possessions within the home such as furniture, electronics and others caused by most unfortunate events often cost impressive sums of money. Having to replace those items without renter’s insurance after an unfortunate event is an unnecessary burden easily avoided by purchasing a policy.
Lastly, consider that if an event forces a renter out of their residence for repairs or even the necessity of finding a new place to live, this transition will not happen within a day. As such, renter’s insurance covers temporary residence and living expenses. Again, this is certain to be a substantial sum of money until permanent residence is re-established. The stress of providing for daily needs is much easier with a comprehensive renter’s insurance policy in place.
As with any insurance policy, costs are an interplay between monthly premiums and deductibles. A higher premium would be mean lower deductibles and generally more generous coverage in case the policyholder files a claim. On the other hand, these are rare events and most of the time, the policyholder will be paying premiums with no immediate return. The appeal of a lower premium can be substantial. Note that costs can be reduced if the insurer gives discounts for security measures, fire protection, and other residence features. Check with a prospective insurer before investing in additional residence security features to verify the renter’s insurance discounts available.
Even the most generous renter’s policy is subject to certain limits. First, there are policy coverage limits. An insurer will only pay out so much, so a policyholder should be prudent in their use of funds to replace a residence or personal possessions.
Another especially important point to note is that not all events are covered. For instance, flood and earthquake damage typically is not covered by standard renter’s insurance coverage and requires different policies specific to those events. Also, property or personal damage caused by negligence, including willful negligence is not covered. For example: failure to report or otherwise fix an obvious leak or electrical hazard that causes damage to personal property would not be covered. Policy holders should know that unusual expensive items like rare coins, art, or antiques will require additional coverage negotiated with the insurer. Companies that offer renter’s coverage have a profile of a typical replacement cost for a particular residence profile, and while of course a policyholder is not required to keep to that expense profile to the penny, unusual or unique items with a large price tag may be out of bounds for what an insurer expects to cover in case of a claim. Lastly, regional limits or additional costs are likely to apply for coverage of “acts of God” that are at higher risk in each area. Example: wind-related damage may cost extra to cover in an area vulnerable to hurricanes or tornadoes, or blizzard/snow damage in an area renowned for long and harsh winters.
After purchasing a policy, a renter would be wise to take the following steps:
1. Document valuable personal property. Example: furniture, valuable electronics, valuable unusual items such as rare property or jewelry. Photos and proofs of purchase should be accessible if residence is damaged. A safe deposit box for physical receipts and/or email accessible from a remote or public computer like those available at a local library would be excellent means of storing proofs of purchase so there is no question that the insurer owes for damaged items in case of a claim.
2. Distinguish between actual cash value and replacement cost of items. The difference lies in the fact that valuable items like electronics typically depreciate over time, so reimbursement for damaged depreciated property will be less than cost of purchase. This may come as a rude shock to a policyholder but is in fact an important component of coverage and pricing. Replacement cost coverage will compensate the full retail price of same or similar new item and is slightly more expensive.
Renter’s insurance is very similar to homeowner’s insurance but applies to people who lease their property. Renter’s coverage is typically very affordable for most people and is a good investment that can give excellent cushion and peace of mind in case of an unfortunate event.