Is renter’s insurance really necessary? Many renters overlook it because they believe their landlord’s insurance covers them. But that is not the case. A landlord’s policy only covers the building itself. It does not protect a renter’s personal property. It also does not protect a renter from liability related to things that happen on the rental property. As that is the case, purchasing renter’s insurance is very important and is often required as part of a lease. Here is quick overview of what a renter’s policy will cover.
Renter’s Insurance: Personal Property Coverage
Renter’s insurance provides coverage for your personal posessions. That is, for all the things you have in your rental property. If items are stolen or are damaged by a covered peril, renter’s insurance will replace those items. Do note, however, that there will be deductible (an amount you pay before insurance coverage kicks in) and a limit on the total amount that the insurance company will pay out.
The deductible amount and policy limits are something that you should discuss with when your renter’s insurance options. Another thing you should as about is actual cash value versus replacement cost.
Actual Cash Value means that you will be reimbursed for the current actual value of stolen or damaged items. If a television you purchased five years ago is damaged in a fire, you will be reimbursed the value of the television minus depreciation. So essentially, you will have enough to go out and buy another five year old television.
Replacement Cost means that you will reimbursed the amount it would cost to purchase brand new items in the case of a covered loss. There are obvious advantages to electing replacement cost, but doing so means higher monthly premiums.
Renter’s Insurance: Liability Coverage
The liability coverage on a renter’s insurance policy serves two important functions. First, it will protect you if a guest is injured on your rental property. Liability coverage will pay for your legal defense if a suit is brought against you. It will also pay for the injured party’s medical bills.
The second thing that liability covers is damage to someone else’s property. The classic example is the overflowing bathtub that floods your downstairs neighbor’s rental unit. The liability coverage on your renter’s insurance policy would pay to fix their property.
As with all coverages, your renter’s insurance liability will only cover you up to policy limits. Make sure you ask about this when you purchase a policy.
Renter’s Insurance: Additional Living Expense
Many renter’s insurance policies also include additional living expense coverage. If you can’t stay in your rental property because of a covered event (a fire, for example), additional living expense will cover the cost of your hotel stay. Some policies will even pay for meals out while you wait for your unit to be repaired.
Asking the Right Questions
Reading about renter’s insurance online is a good start, but talking to a qualified independent insurance agent about the details is crucial. Here are some things you should ask when you go over your policy options:
- How much personal property coverage do I need? Taking a personal inventory of your possessions is a good place to start. This will tell you how much coverage you need and will come in handy if you ever have a claim.
- What deductible amount should I select? The deductible is the amount you pay before insurance kicks in. Higher deductibles mean lower monthly premiums but make sure you are prepare to pay the deductible if a loss should occur.
- What are the policy limits? In other words, what is the maximum amount the insurance company will pay out in the event to of a covered loss? Be sure to inquire about the overall limit as well as category limits.
- Does the renter’s insurance policy provide actual cash value or replacement cost reimbursement?
- What perils should I insure against? A peril is the cause of the loss. Perils include weather, fire, explosions, theft, etc. Some policies cover all perils. Other policies only cover the perils specifically named in the policy. Make sure you know what you’re covered against.
- How much liability coverage do I need on my renter’s insurance policy? A typical policy provides between $100,000 and $300,000 in liability coverage. Talk with your agent to determine what amount is right for you.
- Does the renter’s insurance policy include additional living expense?
Choosing the Right Agent
Perhaps the best part about renter’s insurance is that is it relatively inexpensive compared to other types of policies. For a small monthly amount, you cover yourself and your possessions. At Element Risk, we have long-standing relationships with over 30 insurance carriers for easy, one-stop-shopping. One of our insurance advisors will make sure you get the right coverage at a competitive price, so call or email us today.
