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Beyond Homeowners Insurance: Coverage for Renters

(5/2/2012) Most homeowners understand the need for home insurance. But when it comes to renters, that's not always the case.

The truth is this: renters are more at risk than homeowners. According to the Bureau of Justice, renters are 50 percent more likely to experience theft than those who own their homes. But many renters forgo insurance, believing (falsely) that the landlord's insurance covers renters, or that insurance is too costly.

The good news is renters insurance is relatively simple, comprehensive, and highly cost-effective. To find the best quote, know these key facts:

STANDARD POLICIES
Renters insurance is also known as the HO-4 policy, which covers losses to your personal property from 16 types of damage:

Fire or lightning
Windstorm or hail
Explosion
Riot or civil commotion
Damage caused by aircraft
Damage caused by vehicles
Smoke
Vandalism or malicious mischief
Theft
Volcanic eruption
Falling objects
Weight of ice, snow, or sleet
Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or from a household appliance
Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system
Freezing of a plumbing, heating, air conditioning or automatic, fire-protective sprinkler system, or of a household appliance
Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor or similar electronic component)

Standard renters insurance usually also includes liability protection against medical costs of any accidents on site, and legal costs if anyone sues.

Finally, standard insurance policies for renters also cover “additional living expenses” if your apartment becomes uninhabitable due to a fire, burst pipes, or other incidents. This usually means covering the cost of living somewhere else.

COVERAGE VALUE
While many landlord's insurance policies will cover the physical structure of a building, they do not cover an individual renter's personal property within the apartment.

To cover the personal property you own, there are two types of coverage. Actual cash value (ACV) pays only what your property was worth at the time of damage or theft. Replacement cost coverage pays the actual costs to replace damaged or lost items. Generally, replacement cost coverage has higher monthly premiums but ultimately pays more if a claim is filed. For particularly valuable items, many renters take out separate riders to ensure maximum coverage.

The best way to cover your personal property, no matter which type of coverage you select, is taking full inventory of your possessions. A complete inventory should include lists of all your property and its value, along with pictures.

COST AND DISCOUNTS
Typical insurance can cost renters less than $1 a day. To create even more cost-effective coverage, renters can take advantage of discounts for protective devices, like smoke detectors, security systems, and fire extinguishers on site. Additionally, if you bundle renters and auto insurance policies, you can often save.

For all the protection it provides at highly reasonable cost, renters insurance is a safe, smart, and recommended investment.

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