Even if you’re living in a rental, don’t live without a net.
One of the great things about renting instead of buying is that you don’t have to deal with the commitment of making a long-term investment. But that doesn’t mean your home doesn’t have value, or that this value isn’t vulnerable. After all, even if you don’t own the space itself, it holds most of your personal property. Plus, as the tenant, you’re liable for what happens there. That’s why it’s a smart idea to get renter’s insurance. It’s a relatively affordable way to get some peace of mind along with legal and financial security.
IT’S A SLIPPERY SLOPE
Despite what you might think, your landlord’s insurance policy doesn’t cover everything in your residence. In fact, it covers the place itself, but nothing more. So if a leaky roof floods your living room, you won’t have to pay for repairs to the floor, walls, or other parts of the dwelling, but you will be stuck with the cost of replacing or repairing anything that you lose as a result of the flood.
And if that flood is your fault—say, from a faucet you left on while you were taking a nap—you’re liable for all of the damage that’s done. And what if a guest slips in that water and breaks a leg? Hopefully he or she has health insurance. However, since you created the hazard, you’re liable for the injury, and the health insurance company can legally try to recover its costs from you. In the worst case, your (former) friend could even sue you for negligence.
RUN FOR COVERAGE
If you don’t have insurance protection, accidents can leave you broke. Fortunately, renter’s insurance offers an easy and affordable way to protect yourself from all sorts of losses, both inside and outside of your home.
Renter’s insurance can protect you in two ways:
Loss and damage. Renter’s insurance covers your possessions against losses from fire and smoke, theft, vandalism, lightning, wind, explosion, and water damage from plumbing. Your things are also covered away from home—say, if you’re on vacation and lose a bag—for anywhere from 10% to their full value, depending on your policy. You’re also covered under most standard policies for any items that are in your possession, such as movies you’ve rented or clothes you’ve borrowed from friends.
Some insurance companies set limits for coverage on some valuable items, such as computers or jewelry, but most other things are fully covered under most policies. Certain policies even cover cash losses. But remember, making lots of claims can boost the cost of your policy, or even risk having it cancelled.
Liability. Renter’s insurance covers your liability for other people injured at your home or by your pets. It also covers you for any legal costs you might incur if you get hit with a liability lawsuit.
If you want to get renter’s insurance, the first thing you should do is take an inventory of your home and your possessions so that you know how big a policy you need.
Don’t be too conservative. While it may seem at first glance like you own very little of value, it’s not uncommon to end up with a total of $15,000 to $20,000 or more. You should also be sure to record whatever inventory you take. Make a note of the model and serial numbers of all your expensive appliances and electronics, get written valuations of jewelry or family heirlooms, and describe your collection of baseball cards in detail. It can’t hurt to take pictures of your possessions, or even record them on video. Then copy or back up this record someplace safe outside of your apartment—maybe at your office.
Once you have a sense of how much coverage you’ll need, look around for an insurance company to provide a policy. If you already have car insurance, or you’re planning to get it, many companies will offer you a discount if you take out both policies with them.
HOW IT WORKS
Renter’s insurance works pretty much the same as other forms of insurance. You pay a premium, and if any of the losses covered under your policy occur, you file a claim and the insurance company compensates you for any cost over your deductible, up to your policy’s limit.
Premiums for renter’s insurance are usually inexpensive, anywhere from $75 to $250 a year depending on the company and the type and size of policy. Accepting a higher deductible usually lowers your premium, which can be a smart move if most of the things that matter to you are pretty expensive.
WHAT’S NOT COVERED
Renter’s insurance doesn’t protect you against everything—damage from certain natural disasters such as floods and earthquakes isn’t covered under most policies. When you’re shopping for insurance, read each policy closely to make sure you know what is and isn’t covered. If you think you’re at risk for something that’s not included in the policy you’re thinking about buying, look further or consider getting an additional policy to give you the special protection you need.
If you have a loss that’s covered by your policy, you get paid back in one of two ways, depending on the policy. If you have an actual cash value policy, you’ll get reimbursed for what the item is worth when it’s damaged or lost. So, for example, if you have a computer that’s five years old, you wouldn’t get a lot of money back for it. Fortunately, most companies these days offer replacement value policies, which pay for what a similar item would cost today—so you’d get enough money back to buy a new computer.