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Misconceptions About Renters Insurance

A recently published national telephone survey of 1,000 tenants indicates that 64.4 percent of these respondents do not have renters insurance coverage. Approximately 2 percent were not sure if they had a renters homeowners policy or not. The survey was conducted last year by International Communications Research (ICR)—an independent survey firm based in Media, Pennsylvania—for the Alexandria, Virginia-based Independent Insurance Agents and Brokers of America (IIABA).

It is amazing to think that nearly two-thirds of the estimated 81 million people in the United States who are tenants do not have the proper insurance coverage. This equates to vast amounts of uninsured assets and uncovered personal liabilities.

There are a number of reasons why these respondents do not procure homeowners coverage. They are discussed below.

Myth #1: Coverage Is Expensive

Many of these uninsured respondents believe that this insurance coverage is too expensive. However, renters or contents insurance, often written on the Insurance Services Office, Inc. (ISO) HO 4 Contents Broad Form, or the American Association of Insurance Service's (AAIS's) similarly titled Form 4, is quite inexpensive. According to the IIABA, the average premium is $12 per month for $30,000 in property coverage, $6,000 in loss of use coverage, and $100,000 in liability coverage.

This premium is actually far less than the price of three vente frappuccinos per month at Starbucks. Tenants can often save even more money on premium by choosing a higher deductible, such as $1,000.

Myth #2: Exposure Is Already Covered

Another reason many tenants do not procure a apartment renters contents policy is that they believe that their landlord's insurance covers their personal property. However, the apartment owner's policy covers only the apartment building itself and common areas and the apartment owner's liability. It does not cover the tenant's personal property or liability exposures. If the tenant's apartment burns to the ground, the apartment owner is not responsible for damage to any occupant's personal property.

This is why a renters contents policy for the tenant is essential. This policy provides nearly identical coverage for personal property as compared to the Homeowners 3 Special Form, commonly used to insure single family residences.

Some tenants, such as older college students, may also mistakenly believe that their personal property is automatically covered by their parents' homeowners policy. (This is normally the case for younger students living in college dorms because a dorm room is usually considered a temporary location.) However, if the older student's apartment is their permanent address, even though their parents may help support them, they generally are not considered an insured under the parents' homeowners policy.

Myth #3: Coverage Is Unnecessary

Many uninsured tenants are young people who may not realize the high value of their clothing, furniture, computers, stereos, and often extensive CD collections. This is particularly true as they get older and gradually accumulate more personal property. In addition, many tenants own valuable jewelry, which can be endorsed onto the renters contents insurance policy via the scheduled personal property endorsement.

Myth #4: Coverage Is Narrow in Scope

This policy also covers loss of use in the event of a destructive fire or another major loss. If there is a loss and the apartment is uninhabitable, the insurer would pay for the necessary hotel costs until the insured moves into another apartment.

In addition, the policy provides personal liability coverage. For example, if the insured, while operating his low horsepower outboard motor boat, negligently injures another boater, coverage applies under the liability section of the homeowners contents policy. Another type of personal liability claim might entail a guest tripping and falling inside the insured's apartment. Note that the liability coverage of a homeowners contents policy is nearly always identical to that of the homeowners special form.

Also, some tenants make improvements to their apartments, such as the addition of drapes and built-in cabinets. With the homeowners contents policy, up to 10 percent of the personal property limit for additions or alterations to the dwelling made or acquired at the insured's expense are covered. Thus, if the insured has $30,000 in personal property limits, he automatically receives $3,000 in coverage for any improvements or betterments he makes to the apartment.

Protect Your Fine Arts

Protect Fine Arts

When it comes to valuable fine arts collections, you should take a broad risk management approach to this important loss exposure—an approach beyond simply procuring the proper insurance.

The following are some risk control tips for people with valuable fine arts collections.

  • Maintain your home's interior at a steady temperature (between 65 and 75 degrees Fahrenheit), since extreme heat or cold can damage art work.
  • Avoid placing art work in direct sunlight or near a fireplace.
  • Do not store artwork in a basement or an attic; instead, use a reputable fine-art storage facility for your artwork that is not displayed.
  • Utilize a centrally monitored security system, and use outdoor signs to alert potential burglars of your security system.
  • Install smoke detectors in rooms in which the art is located. Properly frame art work using shatter-resistant fronts to block UV rays, and consider hiring a professional art hanger for your more valuable pieces.

 

Copyright 2016 International Risk Management Institute, Inc.

Protect Yourself With Renters Insurance

Protect Yourself with Renters Insurance

Several recent studies have indicated that only a third of all tenants have renters insurance. Respondents to these surveys often indicate that they believe the coverage is too expensive or that the coverage is provided by the landlord. Yet both of these assumptions are incorrect.

First, the average renters premium is approximately $185 per year. In other words, you can get protection for your personal property and personal liability coverage for as little as $15 per month. Second, your landlord will likely have insurance, but it will only cover the house or apartment structure itself along with the landlord's personal liability.

So here are some tips for you to consider concerning this essential coverage.

  • Create an inventory of everything in your apartment and list the estimated cost of replacing each item. Think in terms of replacement cost, without factoring in any depreciation. This will help you determine the amount of coverage to purchase.

  • Take pictures of your more valuable items and store these off-site, such as in a safe deposit box at your bank, at a friend's home, or in an online cloud storage website.

  • Shop around for coverage. Get quotes from at least three reputable insurance agents and verify whether coverage is for 6 months or 1 year. Consider getting coverage with your auto insurance company since you may be eligible for a car/renter's discount.

  • If your financial condition is solid, consider a higher deductible for your contents since this can reduce your premium significantly.

  • Ask about other discounts, such as ones for smoke alarms, sprinkler systems, nonsmoking households, and security systems.

  • If you have high-value jewelry items, you may want to schedule those on a separate policy or an endorsement to the renters policy for broader coverage.

Get more personal lines insurance and risk management tips and ideas from IRMI.

Copyright 2013
International Risk Management Institute, Inc.

*****

About Renters Insurance

Many renters don’t stop to think about what happens if there is a fire, someone breaks in and steals their new TV or computer, or a visitor slips and falls on their property. The sad truth is; you will be responsible! While your landlord has insurance that covers the building structure, that coverage does not include your personal property or your liability for injuries which occur in the space you are renting ~ be it an apartment or a house and yard.

 

If a fire should destroy or damage your home, your landlord’s insurance will cover the building, but it won’t cover damage or loss of your belongings. Neither will it provide for the cost of temporary housing for you and your family while the building is being repaired.

 

You may think you don’t own enough personal property to make the cost of insurance worthwhile. You’re probably wrong! If you sit down and add up the cost of everything you own, you may be in for quite a big surprise. Consider what you have invested in such things as:

 

• Furniture and accessories

• Electronics like TV, stereo, computers, smartphones

• Small appliances like microwaves, toaster ovens, etc.

• Clothing

• Art work like paintings or prints, or collectibles?

• Dishes, silverware and cookware

• Sporting equipment

• Carpeting and window treatments

• Jewelry and watches

 

Could you afford to replace all of these things?

 

Even worse, what would you do if a friend is injured on your property and decides to sue you for medical costs and more? It’s a scary thought, isn’t it?

 

Are you beginning to see why rental insurance may be a very wise investment?

 

The cost of rental insurance is based on several factors:

 

  • The dollar value of your personal property coverage
  • Deductible
  • Amount of liability coverage
  • Construction of the building structure and protective devices like sprinklers, and alarm systems
  • Whether you choose to be reimbursed for Actual Cash Value or Replacement Costs (more about that in a minute)
  • Where your rental property is located and the number of previous claims made, not only by you, but by others living in the same area.

 

Let me explain the difference between Actual Cash Value (ACV) and Replacement Costs. ACV is the value of your property at the time a loss takes place. For example, if your television set is five years old, it’s valued at much less than if it were brand new. The lesser amount is what you are reimbursed.

 

However, if you opt for Replacement Cost, you’re paid whatever it costs to go out and buy a new TV with similar features. Insuring for replacement cost raises the amount of your premium so it’s a good idea to get quotes for both ACV and Replacement Cost policies. Then you can decide which option fits your needs and budget.

 

Another thing to keep in mind is that jewelry, valuable collections, and guns are usually covered only under a separate policy or “rider”. If you own these kinds of items, be sure to tell your insurance company. You don’t want to find out after disaster strikes that they aren’t covered or that they aren’t covered for their true value.

One way you can reduce the cost of your rental insurance is to check with whichever company insures your car. If they provide rental insurance you may be eligible for a multi-policy discount.

 

Rental insurance will be worth the premium investment just for the peace of mind it offers you.

 

 

 

Try this FREE APP to help you keep track of your personal possessions:

 

 

Important Things to Know About Renters Insurance

Make sure that you personal property is covered for Replacement Cost not Actual Cash Value.  Replacement cost coverage pays the cost to replace your personal belongings without a deduction for depreciation.

 

The higher the deductible the lower the premium is the standard insurance rule, however, renters insurance has a relatively low premium so that selecting a higher deductible may not be worth the savings.  Make sure that you ask for quotes listing the premium savings for the deductible options.

 

The basic Personal Liability coverage in a renters policy is $100,000, but for as little as usually $10.00 to $15.00 a year you can increase that coverage to $300,000 or even $500,000 Limits of Personal Liability coverage.

 

Certain types of property like jewelry, watches, sports equipment, musical instruments, collectibles, art objects, antiques, and business equipment are drastically limited as to the coverage provided under a basic renters insurance policy.  Some policies even have limitations on computer and laptop coverage.  To get proper coverage for these items you need  to add a "floater endorsement" coverage and schedule each item on the policy.  In many cases you will be asked to provide a copy of the bill of sale or a recent appraisal for each item.

 

Flood and earthquake are not covered perils under a renters insurance policy.  You need to purchase these coverages separately.

 

Try the free APP below to help you keep an inventory of your personal possessions: