March
1, 2008
Renter's Insurance: Who Needs It and How
to Buy It
By
Alandale Insurance Agency
If you're renting a house or apartment, renter's insurance can be
one of the best investments you ever make. No one likes to
think about it, but burglars might break in while you're away and
steal your computer, entertainment system, jewelry, and other items.
Without renter's insurance, you will have thousands of dollars in
out-of-pocket costs to replace the stolen items. By contrast,
if you have renter's insurance, you will promptly receive a check
that covers either the replacement costs for the stolen items or the
current value of the items—depending on what type of insurance
policy you've bought.
Perhaps you believe there is little risk of a burglary where you
live. But what about fire? Fires strike randomly and can
begin in electrical wiring over which you have no control.
It's horrifying to contemplate, but you could come home to find that
everything you own has been destroyed. With renter's insurance
you would have a check in hand quite soon to begin refurnishing your
life.
Yet another scenario for which renter's insurance can be of
enormous benefit is personal liability. If a guest is injured in
your home, for example, by slipping on a throw rug, you could be
liable for her medical bills. Renter's insurance would cover
this liability.
Sometimes renters mistakenly think their possessions are covered
by their landlord's insurance. This is seldom true.
Usually, the landlord's insurance covers loss or damage to his
property, not yours. Your landlord's insurance also covers his
liability in case anyone is injured on the property, though not
always injuries inside your apartment.
Most renters can get comprehensive coverage for two hundred
dollars or less a year, depending on where they live.
Considering the risks covered by renter's policies, this is a low
cost for the potential benefits.
Before talking to Alandale about renter's insurance, look around
your house or apartment and take an inventory of items you would
need to replace in the event of a catastrophe. Take note of high
value or difficult to replace items such as antiques, furs, jewelry,
or expensive art. Before you get a policy or immediately
thereafter, you should record information on all your high value
items, including details about the make, model, serial number, age,
and costs (both purchase and current replacement). It may also
help to have photos of these items for identification purposes.
A basic policy usually pays only for the actual cash value of
your items at the time they were lost. In other words, they
would be valued not at what you paid for them originally or what it
would cost to replace them, but at their actual value as used items.
So a 3-year-old computer would be covered for its initial cost minus
depreciation. Since computers depreciate quickly, yours may be
worth little by the time it's 3-years-old, so your insurance
proceeds will be limited.
If you have expensive items like electronics that are subject to
depreciation, you probably should consider replacement cost
coverage. With this type of policy, you would be reimbursed
for the current cost of buying a new equivalent item. Thus, in
our example of the $2,000 computer at 3-years-old, you would receive
a check that would enable you to buy a new computer. Of
course, replacement cost coverage is more expensive. It's up
to you to decide which type of coverage—actual value or
replacement cost—best fits your needs and budget.
Like most other insurance policies, your renter's policy will
have deductibles, that is, an amount of loss you will have to absorb
yourself before receiving any money from the insurance company.
For example, let's say you have a policy with a $500 deductible.
You have cameras you bought for $2,000 several years ago. If
you have replacement cost coverage and the cameras are lost in a
fire, you would receive a check for $1,500 from the insurance
company. Of course, you can lower your insurance premium by
accepting a higher deductible, but this means if there is a loss,
you must absorb more of it from your own pocket.
Renter's insurance usually doesn't cover damage from floods or
earthquakes, but you may be able to get endorsements for these and
other "acts of God." An endorsement extends the
perils covered by your policy. Obviously, you must pay an
extra premium for the extra coverage.
Be sure to discuss any special high value items, such as furs,
antiques, or jewelry, with your insurance agent, since you may need
extra coverage for these.
As mentioned, a basic renter's policy includes liability coverage
should someone be injured in your rented home or apartment. As
with car insurance, there is a per-incident limit on this coverage,
and you should make sure this is high enough to protect your assets.
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