Renters Insurance: Peace of Mind for a Pittance of Money
By Sheree R. Curry
Most homeowners don't think twice about getting homeowners insurance. For renters it's an altogether different story.
Most mortgage companies require homeowners to carry insurance, but there is no such watchdog over the majority of renters. Perhaps not surprisingly, more than half of renters do not carry
renters insurance for their personal effects.
A consumer survey commissioned by the Independent Insurance Agents & Brokers of America found that nearly two-thirds of American renters don't have renters insurance. A national consumer telephone survey asked people living in rental properties whether they had renters insurance; 64% responded "no."
And it’s not just fire you need to worry about damaging your stuff. Even though fires are relatively common, most claims against renters insurance involve theft or accidental damage of products.
Misconceptions Everywhere
The most common misconception among renters is that they are covered under their landlord’s insurance in the event of fire or theft, but that's not the case. The landlord’s insurance covers the building and its infrastructure, such as the furnace and elevators.
Another misconception is that the coverage is pricey. However, many renters don't look into the actual costs. The average cost of renters insurance is $12 a month for about $30,000 of property coverage and $100,000 of liability coverage.
Many policies also include some liability coverage, so if someone is hurt in your home and you are held liable, the insurance can pay for hospital costs, or even pay the cost of your lawyer. You can even be covered for lawsuits.
Renters can choose between two types of policies: "Actual cash value" or "replacement cost." Actual Cash Value pays to replace your possessions minus a deduction for depreciation up to the limit of your policy. This means that the $2,000 computer you purchased five years ago will be replaced at the cost it was worth today, possibly $600 — not enough for you to go out and buy a new one.
Replacement cost pays the actual cost of replacing your possessions up to the limit of your policy. So if it would cost you $2,000 to replace your 5-year-old computer today, then you'd get $2,000 from your insurer. The difference between the policies is usually only a few dollars a month.
In some cases, however, big-ticket items, such as computers and some jewelry or furs, will need to be documented beforehand with the insurance company, and a special floater or rider will extend your coverage.
Sheree Curry is a business journalist who writes a regularly for the Wall Street Journal on real estate issues. Her work has appeared in Entrepreneur, Trump magazine and Black Enterprise.
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