Renter’s Insurance Tips

The recent economic downturn particularly impacted the residential real estate market, forcing many homeowners out of their houses and into rental houses or apartments. In fact, the Wall Street Journal’s MarketWatch recently published statistics that showed renters outnumbered homeowners in the largest cities. Many of these renters are former homeowners who are now forced to rent and may be unfamiliar with renters insurance. According to the Insurance Information Institute, a recent survey showed that only 31% of renters purchase insurance. As a renter, you still have most of the same risks as a homeowner and need to be properly insured in the event of a loss.

The primary difference between a renters insurance policy and a homeowners insurance policy is the lack of coverage for the dwelling. As a renter, you are not responsible for replacing the building should it be destroyed or damaged. The obligation for property damage rests with your landlord. However, you will still be without a place to live until the damage is repaired. The Additional Living Expenses coverage on a renters policy will provide you with the funds to find temporary lodging and pay other additional expenses that exist only as a result of the damage to your rental home.

The risk of loss to your personal property is no different as a renter than as a homeowner. A fire will still destroy your possessions and a burglar can still break into your rental home and steal your valuables. If it was important for you to insure your personal property when you owned your home, that should not change when you are renting a home. Losing your belongings can be devastating, both emotionally and financially. Review and inventory your possessions to determine how much insurance you need and then determine if you want to insure them on a replacement cost or actual cash value basis. Actual cash value will cost less in insurance premium, but you will recover significantly less in the event of a claim.

An important part of home insurance policies is the personal liability coverage that protects you if you cause bodily injury or property damage to others. Some people erroneously believe their personal liability risk is only when someone is injured on their property. In fact, you can be personally liable to others for many of your actions, even away from your home. If you have a dog, as an example, you are always liable if your dog bites someone. Renters policies include personal liability in the same fashion as homeowners insurance policies. If the limit of liability coverage offered on the renters policy is not sufficient, you should consider purchasing an umbrella policy for added protection.

Lastly, you should also consider whether or not you have any valuables that need to be separately insured on a floater. For example, jewelry, artwork, and collectibles are not fully covered on renters and homeowners policies. To fully insure their values, you need to work with your insurance company to purchase separate insurance floaters with higher limits of coverage.

As you can see, you have largely the same risks as a renter that you did as a homeowner. Without the proper renters insurance, you could leave yourself exposed to significant financial loss.

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