Not buying the right type or amount of renters insurance can be costly. Learn how to avoid some common renters insurance mistakes.
Because it isn’t required by law, or by a mortgage lender like car and homeowners insurance respectively, many people don’t purchase renters insurance.
But people don’t realize that renting a home or apartment poses just as much risk to their possessions as owning a home. Your landlord is in charge of insuring the physical structure of the property. However, you’re responsible for your personal belongings and personal liability.
We’ve outlined the most common mistakes people make when purchasing renters insurance. Hopefully, this will prevent you from making the same ones.
Your mortgage lender will generally require you to purchase homeowners insurance if you finance your home—as most homeowners do. As for car insurance, it’s illegal to drive without at least having liability coverage in most states. On the flip side, purchasing renters insurance is up to the discretion of your landlord.
Because many landlords don’t make it mandatory, many people don’t buy it. But the truth is, renters insurance is important.
Your landlord’s insurance will only cover the structure of the home. It doesn’t cover your personal possessions or liability claims.
A basic renters policy will protect you against covered perils. These are things that expose you and your property to risk. The most common covered perils include fire, lightning, windstorm, smoke, vandalism, malicious mischief, theft, and accidental discharge of water.
The policy consists of personal property coverage, liability protection, and additional living expenses.
Some might say they don’t want to spend extra money on renters insurance. But say your kitchen catches fire in your apartment. Renters insurance will cover the damage to your personal belongings, and anyone who was hurt in your home besides the primary residents.
It will also cover the expenses you’ll need to find a temporary residence while your apartment is repaired.
Without renters insurance, you’d have to pay out of pocket for these repairs, any liability claims, as well as additional living expenses.
Corey Brinkman is the regional vice president of Renters Warehouse St. Louis—a company that manages thousands of homes across the country.
“Most tenants don't have renters insurance because they simply don't have all of the information. They think they’re saving money, when in fact, renters insurance is relatively inexpensive,” Brinkman said. “Whether you’re renting an apartment, a condo, or a house, you can get coverage for as little as $10 to $20 dollars a month, and it can protect you if there’s a fire or damage. As a professional landlord service, we have seen firsthand how not having renters insurance can devastate both renters AND landlords. They are always sorry they didn’t have it.”
Renters insurance is perhaps the most affordable type of insurance around. On average, it costs a little more than 100 dollars a year. If your personal possessions sustain damage from a peril and you don’t have renters insurance, you’ll probably be paying a lot more than that.
When you get renters insurance, you buy the personal property coverage at either actual cash value (ACV), or replacement cost. ACV will insure your personal belongings at what they were worth when you purchased them, minus deprecation.
Replacement cost is the cost to replace your items to their original condition. This is the more expensive of the two.
You’ll want to make sure to choose the right type of coverage. Most insurance agents suggest replacement cost, because it provides more coverage.
On the other end of the spectrum, you buy liability coverage in hundred thousand dollar increments. Insurers suggest purchasing at least $300,000 worth of coverage.
You want to ensure you have enough coverage in case someone injures themselves on your property. You’ll want to be able to pay their medical fees, as well as legal fees if they decide to sue.
Never underestimate how much coverage you’ll need. It’s better to pay a few dollars more per month in premiums, than a couple hundred thousand dollars out of pocket.
A deductible is money you pay out-of-pocket when you file a claim, before your insurance coverage kicks in. Premiums are the amount of money you pay (usually monthly) to your insurance company. How much you pay for each depends on what type of policy you purchased.
The two are inversely related. The higher you set your deductible, the lower your monthly premiums, and vice versa.
It’s important to make sure that you can actually afford both of them. You wouldn’t want your deductible to be so high that it would wipe out your savings. On the other hand, you don’t want your premiums to be so large that it’s a challenge to pay them each month. You’ll want to find a happy medium between the two.
Determine your needs and crunch the numbers. Would you rather be paying a $500 deductible and $25 premiums each month? Or a $1,000 deductible and $12 per month? The choice is yours, just make sure your weighing the costs and benefits of all of your options.
Riders, endorsements, and floaters are one and the same. They are optional add-ons that increase the coverage of a policy. Most renters policies come with personal property coverage limits. They also tend to come with caps on the coverage of luxury and collectible items. Most insurers will limit coverage of your jewelry at $1,500. You can add more coverage for your expensive items with endorsements, however.
Endorsements also offer protection beyond the covered perils in your renters policy. They might cover you if you lose an expensive piece of jewelry, or drop it down the drain. Check with your insurer for more information on this, as different insurers treat this feature differently. You’ll also need to get your jewelry and luxury items appraised before you can insure them.
Mark Newman-Kuzel is a licensed insurance agent for Farmers Insurance.
He says, “It's also imperative that an annual inventory should be conducted and pictures taken of any/all valuable possessions. Pictures should be stored safely online in the case that their computer is destroyed in the fire (or other peril), so that they can access these pictures elsewhere. I.e. The Cloud.”
Always keep track of your possessions, because you’ll need a laundry list of what to replace if a peril comes your way.
Despite all the benefits of endorsements, just keep in mind that you’ll be paying higher premiums. However, sometimes, the benefits far outweigh the costs.
Many people believe that only those with valuable items need renters insurance. This isn’t the case. If a fire were to destroy everything in your home, you’d need to purchase replacements for the mundane things that you need in daily life.
The cost of a new bed, new kitchenware, new furniture, and new clothes can really add up. It’s better to pay the few extra dollars a month on premiums, than dish out a few thousand dollars all at once.
Plus, your insurance will cover personal liability. It covers the medical and legal expenses if someone were to get hurt on your property. It also provides additional living expenses if the fire in your apartment results in you living in a hotel for a few weeks.
While your landlord might have earthquake or flood insurance, this will only cover the physical structure of the property. You’re on your own when it comes to the protection of your personal belongings.
If you live in an area prone to one of these natural disasters, talk with your insurer about additional coverage. You may be able to obtain a flood policy through the National Flood Insurance Program (NFIP), or an earthquake policy through various providers.
Speak with your insurer for more information on rates.
Don’t base the policy you purchase primarily on price. That is an important factor, but so are the reputation of the company and the components of the policy.
A policy may be cheap, but it may lack adequate coverage. You’ll want to ensure your policy covers all the bases in terms of personal property, liability, and additional living expenses. Also make sure it includes the right amount of coverage for your needs. You might want a cheap policy, but need more coverage or a rider for your expensive jewelry, musical instruments or antiques.
Do your research and read reviews on different companies through the Better Business Bureau. Also check out the credit ratings through independent agencies like Moody’s, Standard & Poor’s, and Fitch.
The bottom line is: don’t just look for what’s the most affordable.
Sharing a policy is a major faux pas for liability reasons. For one thing, because both your names are on the policy, you’re both responsible for every liability claim. Say your roommate invites her friend over, and the friend hurts herself on your roommate’s treadmill.
She files a claim against you both, and your liability coverage pays for the injuries. The accident wasn’t even your fault, but it will be on your insurance record, because you share a policy.
And if a peril causes you both to file a claim, you must figure out how to split the insurance check. Maybe your roommate claims her possessions got more destroyed than yours, and demands more compensation. To save the trouble, it makes sense to get your own policies.
Always look for discounts when getting a new policy. Insurance companies might offer them for bundling two lines of insurance under the same company. They might also offer deals if you install safety features in your home like burglar alarms and smoke detectors.
Being a student or a military veteran might also qualify you for a discount, as will having a good credit score. Always check with the insurer for discounts, before moving to the next step of the policy purchasing process.
By far the biggest mistake you can make is not shopping around for a policy. The only way to know if you’re getting the best rates is to get quotes from multiple companies. QuoteWizard will match you with top insurers to help you get the best rates on the coverage you need.
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