Basics Of Renters Insurance

Basics of Renters Insurance

A survey conducted by the Independent Insurance Agents and Brokers of America found that nearly two-thirds of renters do not have renters insurance
Renters insurance is relatively inexpensive to own

Your landlord or association may have insurance, but it only protects their building
Your belongings are not covered under their policy
Renters insurance protects individuals who live in a house, mobile home, condominium, or apartment that is owned by another person

Items covered under a policy
Fire/Lightning
Windstorm/Hail
Explosion
Riot
Damage caused by aircraft/vehicles
Smoke
Vandalism
Theft
Volcanic eruption
Falling objects
Weight of snow, ice, sleet
Accidental damage from plumbing, heating, air conditioning, sprinkler system, appliance (includes freezing)
Floods and earthquakes are not covered under standard policies

Most policies cover the behavior of household pets
Renter is liable for events they cause or which occur within their home
Some events which are caused by a landlord’s negligence may be covered by their insurance instead of renters

Actual Cash Value vs. Replacement Cost
Actual Cash Value (ACV) coverage pays only what your property was worth at the time it was damaged or stolen
Replacement Cost coverage will pay what it actually costs to replace item(s) lost – minus any deductible.
You pay more for this coverage

Take Inventory
To ensure compensation lost or stolen, inventory all personal belongings
List each item, value, and serial number
Photograph or videotape each room/building/garage
Keep receipts for major items

Renters insurance will cover “additional living expenses” if rental unit becomes uninhabitable due to disaster ( paying for you to live somewhere else )

Liability protection is standard with most policies
If someone slips and falls by your unit, you are covered for any costs up to your liability limit.

Ways to reduce premiums . . .
Increase your deductible
Discount for “protective devices” (smoke/fire detectors, burglar alarms, fire extinguishers)
Discounts for those age 55 and retired
Discounts if you buy both auto and renters policies
(multi-line discounts)

Value of typical single-person household
Furniture $8,000
TV, VCR, stereo, tapes, CDs $2,000
Computer $1,500
Microwave $ 120
Misc. appliances $ 240
Clothing $3,000
Photos, paintings, etc $ 800
China, glassware, silverware $ 600
Sports equipment $ 600
Cameras, etc $ 800
Books $ 700
Jewelry $1,000
Misc. $4,000
Total: $23,360

Scenario
John has the following renter insurance policy:
$250 deductible
$30,000Person Property Limit
$2,500 Special Limit for certain property
$100,000 Liability
John moved out of the dorms into an apartment with his friends, Chris and Randy. After talking to an insurance producer, John decided to carry renter insurance on his stuff. He gave the agent the following list of items to be covered:
Clothes - $8,000 * Coffee table - $100
Textbooks - $2,000 * Lamps 3@$2each=$75
Couch - $150 * Bed - $200

Chris and Randy owned the $900 TV, $2,000 stereo, and $3,000 computer along with their beds, books and clothes, but they decided that they did not need insurance.
While on break from school, Chris had a grease fire in the kitchen, and everything was lost.
How much did John pay?
$10,525 (everything he had covered)
$2,000 (textbooks only)
$ 250 (deductible only)

$250
(his deductible)

How much did Chris and Randy pay?
Nothing, insurance covered everything
They had no insurance, so had to pay for whatever they wanted replaced.
$250 (deductible)

They had no insurance, so
whatever they wanted replaced
would be at their expense.

How much did the insurance company pay?
$250 (deductible)
$10,525 (enough to cover John’s stuff)
$16,425 (enough to cover John’s stuff and
the TV, stereo, and computer)

$10,525
(enough to cover John’s stuff)

Terms to Know
Deductible – amount of a claim you pay before the company pays anything
Actual Cash Value – current value of an item in terms of cash
Replacement Cost – cost of item as if replaced new
Depreciation – decrease in value of property

Terms - continued
Rent – payment in exchange for occupying another’s property
Security Deposit – money paid in advance of moving into another’s property
Amenities – items that make a property more attractive in comfort or convenience (swimming pool, health club, park, etc)

Terms - continued
Tenant – person that rents and occupies another’s property
Lease agreement - contract between owner of property and renter who will have temporary occupancy of property
Utilities – basic services of electricity, gas, or water

Terms - continued
Rental agreement – a contract between a landlord and tenant that provides for occupancy for a short period of time, such as one month; automatically renews at the end of this period, unless the landlord or tenant give each other the proper amount of notice to terminate the contract.
Rent – an agreed upon sum paid at fixed intervals by a tenant to the landlord for possession and use of property

Works Cited
Insure.com
Ohio Insurance Institute
DIFP (Dept. of Insurance, Financial Institutions,
and Professional Registration)

Basics Of Renters Insurance

by jgrams on Mar 06, 2010

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