Who should purchase renters insurance?

Renters insurance is a practical way to protect your belongingsThe percentage of renters have significantly increased since the economy’s demise, and yet a little less than half have purchased renters insurance, according to the U.S. Census Bureau. This means that approximately 57 percent of renters either do not care if their valuables are stolen or damaged or there’s a possibility that they simply do not realize that although their landlords may have property insurance… that typically only covers the building itself… not the Xbox 360 or the Italian, leather-upholstered couch that is inside the apartment.

“The cost of renters insurance has fluctuated quite a bit, however since the late nineties, it has been in the 40 to 50 percent range but is still significantly lower than people who have homeowners insurance which is at about 96 percent,” says David Corum, vice president of the Insurance Research Council.

Coverage Options for Renters Insurance

Personal Property – Insurance coverage for personal property at home and away.

Loss of Use – Coverage for damages to your home if it becomes uninhabitable due to covered hazard.

Living Expenses – Coverage for daily living expenses such as food and shelter if your property needs to be repaired or replaced. This also covers the cost of having to live somewhere else for up to 24 months until your home is habitable again.

Inflation – This is an automatic adjustment upon your annual policy renewal that covers the cost of inflation if your cost of living rises.

Personal Liability – Covers damages that may include bodily injury to someone visiting your apartment and also covers payments for legal expenses if you are sued as a result.

Medical Payments to Others – If someone is injured on your property this covers their medical expenses up to the policy limit.

Other Coverage Options for an Extra Premium – Examples may include additional business liability coverage, damage due to earthquakes, and increased limits for liability and identity fraud.

Source: State Farm, Liberty Mutual, Geico

You have two options for renters insurance: Actual cash value (ACV) or replacement cost policies. The difference is that “cash value” will pay out the value of your items with depreciation… or in other words, if you have an older appliance or computer, a cash value policy will only pay for its current value or what someone might pay if you sold them the item. Full replacement cost is different in that it takes into consideration what it will cost if you had to buy the lost, damaged or stolen item new based on current prices. Because the insurance company pays less on the claim, the cost of an ACV policy is far less than a full replacement cost policy.

A renters insurance plan today ranges from $15 per month to $30, but this also depends on the insurance company and the amount of coverage. Also, most policies have a deductible that varies, but most are $500 or more. This means that you would have pay a part of the loss depending on the amount of deductible you have on your policy. If you choose to pay a higher deductible on a renters insurance policy the benefit is that you would pay less in premium.

Renters insurance is not just for the purpose of protecting your property inside of the building, but it is also includes liability coverage.

For instance, if you are hosting the party of the year and a guest who may have had a few too many drinks suddenly trips and falls resulting in a concussion, depending on how good of a friend that guest is—they can potentially sue you for that injury.

Now if you are part of that 43 percent who have renters insurance, you don’t have to worry about breaking the bank to pay the medical bills.

Possessions such as clothing, appliances and electronics such as televisions and computers are covered against losses from fire, smoke, lightening, vandalism, theft, explosion, windstorm, and water damage, notes Loretta Worters, vice president of the Insurance Information Institute.

Renters insurance also covers additional living expenses if you are unable to live in your apartment or home due to a fire.

“Most policies will reimburse you the difference between the additional living expenses and the normal living expenses, but may still set limits as to how much money they will hand over,” explains Worters. “What is not covered, are losses due to floods or earthquakes, so individuals would need to buy separate coverage for those damages.”

Now you may ask yourself, what are the odds of someone falling off the balcony or my property being decimated by a Category 5 hurricane? Instead of taking the risk, Worters, deems it essential for renters to obtain renters insurance.  For a relatively low premium, as the saying goes: it is better to be safe than to be sorry.

How Much Renters Insurance Do I Need?

“The best way to determine how much renters insurance coverage to buy is to conduct a home inventory,” says Worters.  The Insurance Information Institute offers free home inventory software to log all of your property and its replacement cost to estimate how much you need covered by your policy and just in case you need to file a claim with your insurance company. The information is stored remotely through secure servers so in case a disaster occurs; this documentation will still be accessible.

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