Home insurance is not just for owners
Some insurance you can't live without—auto, health, and homeowner's, for instance. But renter's insurance? Now that's one that's easy to skip, particularly for new college grads and others scraping by to meet the monthly rent.
And lots of people do. Two thirds of U.S. renters don't have renter's insurance, according to a recent survey by Trusted Choice, a group of insurance agencies and financial services firms based in Alexandria, Va.
Many people think the landlord's insurance will cover any losses from floods, fire, or burglary. Not so. Typically, landlords insure the building structure, period, not your belongings.
Renter's insurance covers your possessions against losses from fire or smoke, lightning, vandalism, theft, explosion, windstorm, and water damage (not including floods). Like homeowner's insurance, renter's insurance also covers your responsibility to other people injured at your home or elsewhere by you, a family member, or even if your dog bites someone. Plus, it pays legal defense costs if you're taken to court. As an added bonus, it covers living expenses if you are unable to live in your apartment or home because of a fire or other covered catastrophe. Most policies will reimburse you the difference between your additional living expenses and your normal living expenses but still may set upper limits.
There are two types of renter's insurance policies:
l "Actual Cash Value" pays to replace your home or possessions minus a deduction for depreciation up to the limit of your policy.
l The more expensive option is "Replacement Cost," which pays the actual cost of replacing your home or possessions (no deduction for depreciation) up to the limit of your policy. If you can handle the higher premium, it's worth it.
As insurance costs go, the coverage is relatively affordable. The average policy runs about $20 per month, or $240 annually, for $20,000 of property coverage and $500,000 of liability coverage, according to the Independent Insurance Agents & Brokers of America. But depending on where you live, your deductible, and your insurance company, you might be able to land a policy for as little as $150 a year.
Keep in mind that a standard renter's policy offers only limited coverage for items such as jewelry, silver, or fine art. Generally, insurers cut you off at between $1,000 and $2,000 for such pricey possessions. A special personal property floater lets you insure the items individually. The premium will be based on the appraised dollar value and where you live. There's usually not a deductible. Then too, business property worth more than $2,500 isn't typically covered under a standard policy, so you will need to get additional coverage.
Moreover, given that the National Hurricane Center is calling for a "very active" 2006 Atlantic hurricane season, depending on where you live, you might opt for a flood insurance policy as well. A flood insurance policy costs an average of $400 a year. The Federal Emergency Management Agency provides useful information on flood insurance at its website. You can buy the coverage from your homeowner's insurance agent, but the policy is provided by the National Flood Insurance Program.
To make sure you have enough coverage, do a home inventory. It lets you see if you have insured everything inside your house, plus it can help settle a claim faster. Start by making a list of your material goods with a description, including make, model, and serial number (in the case of appliances and electronics). Attach any sales receipts and appraisals to the file. Take pictures or videotape the rooms. Keep your documentation in a safe deposit box or at a friend's home. For easy record keeping, download the Insurance Information Institute's new home inventory software; it's free.
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