insurance

Why Renters Need Insurance

Your landlord's policy won't cover your possessions.

The majority of Americans who rent an apartment or home don't have renter's insurance, according to a new survey released by InsuranceQuotes.com. That's because many say that their apartment building has good security and mistakenly believe that their landlord's policy will provide the coverage they need. Those surveyed also thought that renter's insurance was a lot more expensive than it really is.

Actually, any insurance a landlord may have will cover only the structure, not tenants' belongings. Even if a building is in a safe area and has a security system, there's still the risk of disasters such as fire or water damage from a leak. Without a renter's insurance policy, any damage to a tenant's property wouldn't be covered. The good news is that this coverage is quite inexpensive.

The average annual cost of renter's insurance is just $185 per year, according to the National Association of Insurance Commissioners. So that works out to just a littler more than $15 a month, which is a small price to pay for coverage against losses from fire or smoke, lightning, vandalism, theft, explosion, windstorm and water damage (not including floods). If your home or apartment is damaged by a covered event and you have to live somewhere else, most policies will reimburse you the difference between your additional living expenses and normal living expenses. Plus, renter's insurance helps cover legal costs if you're taken to court because someone is injured at your residence. The primary reason that renter's insurance is less expensive than homeowner's insurance is because it just covers belongings -- not a dwelling, says Laura Adams, senior insurance analyst at InsuranceQuotes.com.

Adams says that renters should shop for policies based on the specific amount of coverage needed. So you need to take inventory of what you have and determine a value for your belongings. You can get either a replacement-cost policy, which will pay to replace your possessions up to the policy's dollar limit, or a cash-value policy, which will pay only what the items are worth when stolen or damaged. You should expect to pay about 10% more for replacement-cost coverage, according to the Insurance Information Institute.

If you have expensive jewelry, collectibles or art, consider adding a floater to your policy to provide more coverage. Standard policies offer only a limited amount of coverage for these items. You'll need receipts or appraisals for items to be covered by the floater. And Adams says that if you have a high net worth or the likelihood of getting involved in a lawsuit, consider increasing the standard liability coverage,which is usually $100,000, or getting a separate personal umbrella policy (see Why You Should Have Umbrella Liability Insurance).

When shopping for policies, get quotes from several companies. You can compare costs at Web sites such as NetQuote.com and InsWeb.com. Make sure that the primary cost factors are equivalent when you compare policies or as close as possible so that you have an apples-to-apples comparison, Adams says. These include the types of coverage you buy, the amount coverage you buy and the deductible (the amount you pay out of pocket before insurance kicks in), she says.

Also ask about discounts. For example, you might have to pay less if you have a security system, smoke detectors and deadbolt locks. Insurers also offer discounts to customers who have multiple policies with them, have good credit or are 55 or older. So be sure to ask about ways to lower your premium.

Price is certainly an important factor, Adams says. However, the value of choosing a reputable and service-oriented insurer shouldn’t be overlooked. See Find Out How Insurers Handle Claims for advice on checking a company's complaint record.

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