Guide to Buying Renters Insurance

Guide to Buying Renter’s Insurance

If you live in a home you don’t own, such as a house, apartment, townhome, condo, or any other type of residence, it is important to purchase renter’s insurance. Renter’s insurance is usually easy to obtain and is typically inexpensive. However, you must understand the policy in order to get the best possible coverage for your particular situation.

Renter’s Insurance Basics

There are three main types of coverage in a renter’s insurance policy: contents, additional living expense, and liability. Contents insurance covers your possessions while liability insurance covers you for injuries or damage you may cause to others as a result of an accident that may occur on or away from your premises. Additional Living Expense coverage pays for the increased cost you may incur to maintain your standard of living if your home should become uninhabitable as a result of a covered occurrence.  Most insurance policies provide all three types of coverage.

It is important to note that renter’s insurance may not provide coverage for specific types of perils. Generally, natural disasters such as floods and earthquakes are not part of the standard perils covered by the insurance policy. Other non-covered perils may include intentional acts, damage from chemicals, rodent damage, and damage from rust or mold. Check your policy to see which items are covered and which are not.

Perils that are usually covered by renter’s insurance are:

  • Theft
  • Fire and smoke
  • Vandalism
  • Broken water pipes
  • Lightening
  • Windstorms and fallen trees
  • Slip and fall accidents
  • Dog bites (may be restricted by breed)

Policy Coverage

The minimum coverage for those who do not own a substantial amount of property should be about $15,000 for personal property with a $500 deductible (other limits and deductibles are available). Liability coverage is best kept to $100,000 at the very least, depending upon the value of your assets that may need to be protected from a lawsuit for injuries sustained by someone as a result of your negligence. This type of policy would be one of the least expensive choices and would likely be priced at under $200 per year.

Policy details typically included:

  • Contents loss (on premises) – Your possessions, including most items you own while in your home.
  • Contents loss (off premises) – Coverage for your personal belongings when they are not in your home.
  • Living expenses – Money to cover hotel costs should your home become unlivable.
  • Personal liability – Protects you when someone is hurt as a result of your personal activities at or away from your home.
  • Property loss of others – Coverage for damage or loss of other people’s property while at your home.
  • Additional coverage – Optional coverage for special items of value.

Each policy is different, so you should choose a policy that fits your needs and your budget. Read the policy completely before signing it to ensure that you understand the coverage you will be receiving.

Policy Limits

Every renter’s insurance policy has specific limits. Limits are the maximum dollar amounts that will be paid for a loss or claim. You can choose the limits that meet your needs. Higher limits mean more coverage; however, it will also be more expensive as you increase the limits. Therefore, you need to consider carefully the limits that will meet your needs based upon the value of your personal property and the amount of liability protection you want. It is better to be a little over-insured than underinsured. This will keep you better protected. The incremental cost of increased coverage is typically low for renter’s insurance, so you should make sure that you have adequate limits so that you have peace of mind knowing that you will be taken care of in case of a catastrophic event.

Deductibles

A deductible is the amount of money you must pay before a claim will be paid. You can choose the amount of deductibles for your policy. The amount of your deductible will change the cost of your policy. For example, if you have a $500 deductible you will need to pay the first $500 of any claim that you submit. When you have a higher deductible, the cost of your policy is usually lower. The insurance company will reduce the payout of a claim by the amount of the deductible. The most common deductibles are $500, $1,000, and $2,000.You should determine how much you could typically afford to pay if you were to have a loss of some kind, while trying to keep your policy premium affordable.

Home Inventory

It is necessary to make sure that all of your belongings are properly inventoried and accounted for before buying a policy. Only properly documented claims will be paid, so it is essential to keep an inventory and information on all of your property. The inventory may be made by hand or done through computer or video. You may choose to complete a home inventory that is organized by room or by category.

An online checklist such as this will help you track all of your possessions so that you leave nothing out. There are also special computer programs and smart phone apps that can be utilized for this purpose. Keep your inventory up to date and save all of your receipts. Also, make sure to photograph your belongings as a part of your inventory. Some items may require unique treatment such as providing an appraisal for expensive artwork or jewelry. Your insurance company will inform you of any special requirements.

Insurance Policy Riders

Some items may not be covered, or may be covered for limited amounts as part of a standard insurance policy. These items include jewelry (including watches), furs, antiques, artwork, sterling silverware, computers, or firearms. Since policies may differ, you should review your coverage to learn what is not covered or is limited to an amount less than you require. You can still insure these items, but they will require special coverage in what is called an insurance rider. The rider adds the item to the policy by name. For example, if you have an expensive diamond ring, you must add it to your policy with a rider. Insurance companies typically require you to have an appraisal completed.

Costs and Discounts

Unlike homeowner’s insurance, renter’s insurance does not cover the structure, which should be insured under the owner’s policy. This makes renter’s insurance more affordable. The average price of renter’s insurance is between $160 and $200 per year. The actual amount you will pay depends on the coverage choices you make. Also, the cost of insurance varies based on zip code and on previous claims in your area. Your credit score could also be a factor in pricing your policy.

Many insurance companies offer multiple types of insurance policies. For example, a company may offer car insurance as well as renter’s insurance. Companies that offer both types of policies may provide a discount to those who purchase multiple policies. This is one consideration when choosing an insurance company.

Other discounts may apply to those who have certain features installed in their homes. For example, security alarms and deadbolt locks are just two of the items that could get you a discount on your insurance. Additionally, fire deterrent systems like sprinklers and fire alarms installed in the building could also allow you to receive a discount. Be sure to find out if your building has these devices so you can receive a reduced price if applicable.

Where to Purchase Renter’s Insurance

Renter’s insurance is available through many major insurance companies. An insurance agent or broker is a good place to begin the process of buying a policy. An insurance agent is a representative who works for a specific insurance provider. A broker does not work for any single insurance company and works with many providers to find clients an insurance plan that best fits their needs. The insurance company who insures your vehicle may offer renter’s insurance, and they may offer a discount for multiple policies.

Many insurance companies offer renter’s insurance as part of their regular product offerings. You can view information, obtain quotes and compare policies online by searching “renter’s insurance (your zip code)”. Your search results will show insurance agents in your specific area who provide renter’s insurance. When you compare insurance rates and companies, be sure to request the same coverage and deductible amounts. Get at least a few quotes from different companies so you can properly evaluate them.

Choose a company that has a good reputation. In addition to coverage and price you will also need to make sure that the company offers good customer service and provides fast and easy claim processing. You can also read testimonials and ratings from current or past customers to learn more about the company and how they handled their claims.

Review and Update Your Policy

A renter’s insurance policy is renewed annually. This provides you with the opportunity to make any necessary changes. Remember that if you buy something major during the middle of your policy term you should add it to your inventory, evaluate whether you still have the proper amount of coverage, and if necessary, contact your insurance company to have it added to the policy, even if it means your rates will be adjusted for the partial year remaining.

We would like to thank JoEllen James, a local insurance agent, for providing her professional input for this Guide.

Additional Online Renter’s Insurance Information

http://www.naic.org/documents/consumer_alert_renters_0812.htm

http://homeguides.sfgate.com/average-cost-renters-insurance-8445.html

https://www.nerdwallet.com/blog/insurance/find-best-renters-insurance/

DISCLAIMER: This guide is provided only for informational purposes and is not intended to be a substitute for legal or other professional advice. This guide does not contain nor is it intended to provide legal or other professional advice for any specific situation and readers should not take action or refrain from taking action, based only on the information provided in this guide. Goldberg & Osborne has attempted to provide accurate and current information in this guide, but cannot and does not guarantee that the information is accurate, complete, or up to date. This guide may contain links and/or search terms that will lead to external websites as a convenience to the reader, but Goldberg & Osborne is not responsible for the content or operation of any website other than its own website. The presence of a link or a search term does not imply and is not an endorsement by Goldberg & Osborne of the website provider or the information contained on any linked website or on any website contained in search results from a search term provided in the guide.