Renter's insurance protects against property losses such as losses from theft, fire, vandalism, or water damage. In addition property coverage, renter's policies may offer protection against personal liability, guest medical benefits, additional emergency living expenses, and credit card protection.
Determining Your Need
Many tenants believe their landlord's insurance policy covers their personal property, but in fact, it does not. If you were a victim of fire or theft, could you afford to replace your clothing, TV, stereo, computer, and other personal property? Renter's Insurance helps you protect your valuable possessions in the event of loss or damage. Some students choose to be covered by their parents' homeowner's insurance. However, that policy may not cover rentals in case of fire. If you are considering coverage through a parent's policy, check with the insurance agent about the specifics of the coverage.
How much will it cost today to replace property stolen by a burglar or damaged by fire? If the depreciated value of your property in the fair market is much less than the replacement cost, it is wise to buy insurance that pays for replacement cost. For example, replacing a 3-year old computer will cost typically cost much more than the present value of the older model.
Loss of Use
Many policies include a dollar limit for rentals if fire forces you from your home. Check your rental agreement to see how long you have agreed to wait after a fire for your landlord to make your apartment habitable again. Most leases say 30 days, but some have 45, 60, 90, or even 120 days. Be sure your 'loss of use' coverage is enough money to pay for the rental for the amount of time you've agreed to in your lease, plus a few additional days to shop for a new unit in the event that the landlord is unable to make your unit habitable.
Before purchasing an insurance policy, it is important to understand the terms of the policy.
Your insurance premium is the amount you pay for the policy. Many insurance policies offer the option to pay monthly, quarterly, or annually.
The deductible is the amount you pay before the insurance company will cover the claim. Most renter's insurance policies have a deductible between $100-$250, but some may be higher. Usually your premium (the amount you pay for the policy) is higher if your deductible is lower.
Amount of Coverage
To calculate the amount of coverage you need, you should first estimate the cost of everything you own.
- Take an inventory of all your possessions, along with the purchase price or current value.
- If you have any high value items (jewelry, antiques, fur, stamp collections, works of art, electronics, etc.), it is a good idea to have a picture of those items and, if possible, a receipt of purchase.
- Estimate the cost of a temporary rental unit for the duration of the rental agreement's 'loss of use' period, in case of fire.
When you add up the costs listed above, this will give you an estimate of the coverage you need for your renter's insurance. Most young tenants who rent furnished apartment and do not have much property buy a $10,000 policy. If you own your own furniture or have more expensive items, you may need more coverage.
Types of Coverage
Different insurance policies vary on the types of loss they cover. While fire, burglary, and theft are commonly covered, other types of loss may not be.
Be sure to ask your agent if damage to property from roof or pipe leaks or other water damage is covered. Other than fire and burglary, the most common complaints about property damage involve water damage.
Sewer Backups, Water Seepage, and Flooding
These situations are usually not covered by a standard insurance policy. If you are renting a basement apartment or a house with a basement, you may need to purchase an additional rider to your policy to cover damage from flooding, water seepage, and sewer backups.
For earthquake coverage, you may need to purchase an additional rider to the your policy.
Finding the Right Insurance Plan
If you decide to purchase renter's insurance, you should obtain quotes from several insurance agencies. The price will often depend upon where you live, the size or number of units in your building, your credit history, the amount of deductible, and how much coverage you want. Companies that offer auto or other insurance polices will often offer a small discount for multiple policies (e.g. auto and renter's insurance). Below are resources to help you begin your search:
California Department of Insurance
Tel: (800) 927-4357
Tel: (877) 99-RATES
Tel: (800) 400-4AAA
State Farm Insurance