If you are one of millions of Americans who rent rather than own their homes, you may believe that your landlord’s insurance policy will cover your property in the event of a catastrophe such as a fire or flood. Unfortunately, as many people have discovered far too late, that is not the case. Although the landlord’s policy typically covers the building and its contents, such as cabinets, rugs, appliances and such, it will not reimburse you for your personal property or any associated financial loss.
What Is Renter’s Insurance?
Renter’s insurance is an insurance policy that covers your possessions, such as clothing, furniture, bedding and TVs, in the event of a “covered peril” such as fire or theft. Some policies also cover personal property that is stolen or damaged when you’re away from home, such as if a thief runs off with your Bose headphones while you’re grabbing a coffee at Starbuck’s.
Additionally, if your home becomes uninhabitable following a covered event such as a fire, a typical renter’s insurance policy will pay for alternate accommodations for a reasonable period of time while your home is being repaired. It will also pay to have any salvageable possessions removed from the home, cleaned and returned to you.
Most renter’s insurance policies also cover some level of personal liability, which means you are covered if someone is injured in your home.
What Doesn’t Renter’s Insurance Cover?
Renter’s insurance covers personal property up to the value specified in your policy. So before buying coverage, make sure you take careful inventory of everything you own. Renter’s insurance is inexpensive–a typical premium for $30,000 in property coverage and $100,000 liability is between $15 and $20 per month, or about the cost of three or four lattes from your favorite coffee shop.
Some renter’s insurance policies exclude coverage for big-ticket items, such as jewelry and works of art. However, you typically can buy an endorsement for these kinds of items relatively inexpensively. Additionally, most policies cover water damage due incidents such as a broken pipes but do not cover damage caused by weather-related floods. If you live in a high-risk flood zone, it may be worth your while to check into flood insurance as well.
More Renter’s Insurance Tips
- Actual Value Versus Replacement Value
Before you buy a renter’s insurance policy, ask your insurer if it covers the actual value or the replacement value of any property that’s lost. This is a very important distinction, and one that can cost you thousands of dollars if you get it wrong.
Simply put, actual value coverage covers the value of your property as it exists at the time of the loss.That is, it takes into account how much your property has depreciated over time. For example, a computer that you bought a year ago for $2,000 may have an actual value of $300 today. On the other hand, replacement value coverage reimburses you for the amount it will cost to replace your property now rather than what it was worth.
The difference in the amount you receive from your insurance company if you have actual value coverage versus replacement value coverage can be enormous, especially if you suffer a large loss (for example, in a fire.) Thus, while the rental insurance premiums for replacement coverage are about 25 percent higher than actual value coverage, it is almost always the better choice.
- Location matters
If you live in a high-crime area, your renter’s insurance premiums will be higher than if you live in an area where there is little crime. Although there may be little you can do about where you choose to live, it’s good to know that this may be an issue when you’re shopping around for the best deal.
- Quit smoking for the best rates
Since many accidental fires are caused by people who smoke, many insurance companies provide a discount to non-smokers (yet another important reason to quit.)
- Install an alarm system
Although it doesn’t guarantee you a lower rate, having an alarm system in your home may lower your renter’s insurance premiums. Generally, the system must be professionally installed and monitored by a home security company to earn a discount.
- Watch your credit score
Most insurance companies run a credit report on anyone who applies for coverage: The lower your credit score, the higher your rates.
If you’re considering buying renter’s insurance (and you should!) you don’t need to make the decision alone. Our insurance experts are here to help guide you and ensure that you have the very best coverage for your needs. We’re available every weekday from 9 a.m. to 6.p.m., so call us at 516-292-3780 to schedule your insurance review. Or if you prefer, schedule a free consultation online now.