By Holly Jones
The challenging housing market is causing more people to decide that renting, rather than owning, is the best short-term option. In fact, a May 2010 National Apartment Association survey found that 76 percent of consumers believe renting is more advantageous than owning a home, a five percent increase from 2008.
While more people may now be renters, many don’t realize it’s important to protect their finances by protecting their personal possessions with renter’s insurance.
While landlord insurance coverage typically protects the building, it is up to renters themselves to protect their personal property. It can be costly to replace possessions lost in fire, theft, vandalism, windstorms and other calamities. Renter’s insurance protects personal property, and may even reimburse renters for reasonable living expenses if they have to live somewhere else as the result of a covered event, such as a fire. Plus, renter’s insurance often covers injuries sustained on rental property and can help protect a renter’s personal assets against claims by an injured party.
Here are the basics on renter’s insurance:
• Items covered – Includes clothing, furniture, televisions, kitchen items, computers and other technology tools. Also, depending on the policy, personal belongings may be protected no matter where they are used—for example, if a renter’s car is stolen while the renter is traveling.
• Replacement cost coverage – As the name suggests, this covers replacing possessions up to the amount of coverage purchased. The alternative is called actual cash value coverage, which pays only what the lost or damaged item was worth at the time the coverage was purchased.
• Liability coverage – This is often a standard part of a renter’s insurance policy. It helps provide protection to the renters if they, their families or even their pets cause harm to a person or damage someone else’s property. If someone is injured while visiting, medical costs can add up quickly and it is possible to be on the wrong side of a lawsuit. With liability coverage, the insurance company covers those obligations, as well as legal costs up to the policy limits.
• Highly valuable items – Jewelry, art and even an expensive bicycle should be covered individually. This can be done through a rider, which is an addition to the policy that covers the item by itself.
• Costs for renters insurance – Costs vary based on location, the type of building and other factors. Generally speaking, premiums are between $130 and $300 per year, or $11 to $25 per month, to cover $10,000 to $30,000 worth of possessions.
Usually, policies also include liability protection between $100,000 and $300,000. The amount of the deductible on a policy can have a significant impact on its cost—the higher the deductible, the lower the premium. Increasing a deductible from $250 to $1,000, for example, can lower costs by up to 15 percent.
To make the claims process easier, renters should prepare a property inventory of their possessions, including photos. This will help determine the amount of coverage needed, and it will help ensure that all items are replaced. Renters should also remember to keep receipts for significant purchases and record model names and serial numbers of electronic equipment. And, if there are roommates, each should have his own renter’s insurance policies for his personal possessions. One renter’s policy covers one person’s possessions.
If you are renting, talk with an insurance provider, who can help you as you review your situation and make sure you have effectively protected your possessions and your personal assets. Then, enjoy your rental unit, knowing you are helping protect your favorite things and your financial security at an affordable cost.
Holly Jones is an area president for Wells Fargo in Houston.
