Renter's Insurance - The Basics

Real Estate Broker/Owner with Pro Players Realty
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Thought you were covered by your landlord's insurance? Think again. You'll need renter's insurance to protect your belongings from perils like theft, vandalism, fire and falling objects.


You're moving into a new apartment and you have a lot to do: setting up telephone and cable service, letting people know your new address, deciding how to arrange your living room -- the last thing you're thinking about is insurance. If you live in a condominium or rent an apartment, your landlord's or condo association's insurance should cover damages to the building -- meaning the structure itself. But such a policy only covers their building and not your belongings. That's why you should have renter's insurance. Regardless of whether you live in a house, condo or apartment, replacing your stuff or defending yourself against a liability lawsuit can take a big toll on your bank account.

It's a perilous business Basic home insurance policies are generally known by their number. Both the HO-4 (for renters) and HO-6 (for condo owners) policies cover losses to your personal property from 17 types of peril:
  • Fire or lightning
  • Windstorm or hail
  • Explosion
  • Riot or civil commotion
  • Aircraft
  • Vehicles
  • Smoke
  • Vandalism or malicious mischief
  • Theft
  • Damage by glass or safety-glazing material that is part of a building
  • Volcanic eruption
  • Falling objects
  • Weight of ice, snow, or sleet
  • Water-related damage from home utilities
  • Electrical surge damage
Sounds like quite a lot, doesn't it? You may notice, however, that floods and earthquakes aren't on the list. If you live in an area prone to those, you'll need to buy a separate policy or a rider on your renter's policy. In some coastal regions, where hurricanes can cause mass destruction, you may also need to buy a separate rider to cover you from windstorm damage.

One thing you want to look at when you shop for insurance is whether the company will be writing "actual cash value" (ACV) or "replacement cost coverage." As the name implies, ACV coverage will pay only for what your property was worth at the time it was damaged or stolen. So, if you bought a television five years ago for $300, it would be worth significantly less today. While you'd still need to shell out about $300 for a new one, your insurance company will pay only for what the old one was worth, minus your deductible.

Replacement cost coverage, on the other hand, will pay for what it actually costs to replace the items you lost. Usually, you'll have to pay out of your own pocket to replace your damaged items and submit the receipts to the claims adjuster for reimbursement. Even so, you'll still get a bigger chunk of change back than if you bought ACV coverage.

In some places, most companies write ACV coverage. In others, they'll quote you replacement cost coverage by default. Replacement cost coverage will cost you more in premiums, but it also will pay out more if you ever need to file a claim.

Make sure you also let your agent know about any particularly valuable items you have. Things like jewelry, antiques and electronics may be covered up to a certain amount, but if you have some items that are unusually expensive, like a diamond ring, you'll probably need to purchase a separate rider. If you don't talk to your agent about an expensive item when you buy the policy, you probably won't be able to recover the loss.

Footing the bill when your home is unlivable
If your apartment becomes unlivable due to a fire, burst pipes or for any other reason that is covered by your policy, renter's insurance will cover your "additional living expenses." Generally, that means paying for you to live somewhere else, such as another apartment that is in a similar price range as your original place. This coverage has a limit of about 30% to 40% of the total value of the policy. So, if you're insured for $100,000, your "additional living expenses" limit will be $30,000 or $40,000, depending on your individual policy. Your insurance company will continue to pay while your home is being repaired or rebuilt, or until you permanently relocate. However, sometimes 12 months is the longest an insurance company will continue paying. Other times, you're limited to what the insurance company considers a "reasonable length of time."

Additional benefits
Renter's insurance has additional benefits that might not immediately come to mind. For example, if you own a waterbed, a waterbed liability provision is standard in most policies, according to Mike Binns, personal lines underwriting manager for Farmers Insurance Co. If your waterbed bursts and the water ends up in the apartment below yours, renter's insurance will cover the damage.

Liability protection is also standard with most renter's policies. This means that if someone in your apartment slips and falls, you're covered for any costs, up to your liability limit. And if this person should choose to sue you, you're covered for what they win in a court judgment up to your policy's limit, along with legal expenses, too, because, according to Binns, your insurance company agrees to defend you under your liability protection provision.

What's this going to cost me?
Just like any other insurance policy, your premium depends on a number of factors: where you live, your deductible, your insurance company and if you need any additional coverage. However, if you don't need any extra coverage for expensive jewelry or computers, and you shop around, you probably will pay somewhere between $150 and $300 per year for coverage, according to Jayna Neagle, a spokesperson for the Insurance Information Institute. That will get you about $30,000 to $35,000 worth of coverage for your personal possessions and somewhere between $100,000 and $300,000 worth of liability protection.

Keeping your premium low
Renter's and condo policies usually cost less than homeowner's policies. While some factors will be out of your control -- where you live or what your building's made of -- there are still ways to keep your premium low. Increasing your deductible (the amount you pay before your coverage kicks in) is one way to keep your costs down. However, be sure that you'll be able to afford whatever deductible you choose.

If you're thinking about getting a dog, you may want to think twice. Some insurance companies are skittish about writing policies for owners of certain breeds: Rottweilers, pit bulls, and Doberman pinschers might make getting renter's insurance hard, especially if they've bitten people in the past.

Other available discounts will depend on your insurance company -- be sure to ask what discounts it offers. Most companies offer a discount for having "protective devices," including smoke and fire detectors, burglar alarms and fire extinguishers.

Some companies may offer a discount to policyholders who are over 55 and retired. Other companies may offer a discount if you get a combined auto-renter's policy.







John Stehmeyer


Buyers Specialist First Time, Move Up and Luxury

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Graduate Realtor Institute

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This message is not intended as a solicitation to any individual whose property is listed exclusively with another broker.


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