| "KNOWLEDGE IS THE BEST POLICY" | ||||||||
The basics of renters insurance You're moving into a new apartment and you have a lot to do: setting up telephone and cable service, letting people know your new address, deciding how to arrange your living room — the last thing you're thinking about is insurance.
If you live in a condominium or rent an apartment, your landlord's or condo association's insurance should cover damages to the building — meaning the structure itself. But such a policy only covers their building and not your belongings. That's why you should have renters insurance. Regardless of whether you live in a house, condo, or apartment, replacing your stuff or defending yourself against a liability lawsuit can take a big toll on your bank account. It's a perilous business Basic home insurance policies are generally known by their number.
(For more, read Home insurance basics.) Both the HO-4 (for renters)
and HO-6 (for condo owners) policies cover losses to your personal
property from 17 types of perils: * fire or lightning Sounds like quite a lot, doesn't it? You may notice, however, that floods and earthquakes aren't on the list. If you live in an area prone to those, you'll need to buy a separate policy or a rider on your renters policy. In some coastal regions, where hurricanes can cause mass destruction, you may also need to buy a separate rider to cover you from windstorm damage. Actual cash value vs. replacement cost
One thing to look at when you shop for renters insurance is whether
the insurance company will be writing "actual cash value"
(ACV) or "replacement cost coverage." As the name implies,
ACV coverage will pay only for what your property was worth at the
time it was damaged or stolen. So, if you bought a television five
years ago for $300, it would be worth significantly less today.
While you'd still need to shell out about $300 for a new one, your
insurance company will pay only for what the old one was worth,
minus your deductible. Replacement cost coverage, on the other hand, will pay for what
it actually costs to replace the items you lost. Usually, you'll
have to pay out of your own pocket to replace your damaged items
and submit the receipts to the claims adjuster for reimbursement.
Make sure you also let your agent know about any particularly valuable items you have. Jewelry, antiques, and electronics may be covered up to a certain amount, but if you have some items that are unusually expensive, like a diamond ring, you'll probably want to purchase a separate rider. If you don't talk to your agent about an expensive item when you buy the policy, you probably won't be able to recover the loss. Footing the bill when your home is unlivable
If your apartment becomes unlivable due to a fire, burst pipes,
or any other reason that is covered by your policy, renters insurance
will cover your "additional living expenses." Generally,
that means paying for you to live somewhere else, such as another
apartment in a similar price range as your original place. This coverage has a limit of about 30 to 40 percent of the total value of the policy. So, if you're insured for $100,000, your "additional living expenses" limit will be $30,000 or $40,000, depending on your policy terms. Your insurance company will continue to pay while your home is being repaired or rebuilt, or until you permanently relocate. However, sometimes 12 months is the longest an insurance company will continue paying. Other times, you're limited to what the insurance company considers a "reasonable length of time." Additional benefits Renters insurance has additional benefits that might not immediately
come to mind. For example, if you own a waterbed, a waterbed liability
provision is standard in most renters policies. If your waterbed
bursts and the water ends up in the apartment below yours, renters
insurance will cover the damage. Liability protection is also standard with most renters policies. This means that if someone in your apartment slips and falls, you're covered for any costs, up to your liability limit. And if this person should choose to sue you, you're covered for what they win in a court judgment, up to your policy's limit, along with legal expenses. What's this going to cost me? Just like any other insurance policy, your premium depends on a
number of factors: where you live, your deductible, your insurance
company, and whether you need any additional coverage or riders.
However, if you don't need extra coverage for expensive jewelry
or computers, and you shop around, you probably will pay somewhere
between $150 and $300 per year, according to the Insurance Information
Institute. That will get you about $30,000 to $35,000 worth of coverage
for your personal possessions and somewhere between $100,000 and
$300,000 worth of liability protection. Keeping your premium low Renters and condo policies usually cost less than homeowners policies.
While some factors will be out of your control — where you
live or what your building's made of — there are still ways
to keep your premium low. Increasing your deductible (the amount
you pay before your coverage kicks in) is one strategy. However,
be sure that you'll be able to afford whatever deductible you choose.
If you're thinking about getting a dog, you may want to think twice.
Some insurance companies are skittish about writing policies for
owners of certain ferocious breeds: Rottweilers, pit bulls, and
Doberman pinschers might make obtaining renters insurance hard,
especially if they've bitten people in the past. Other available discounts will depend on your insurance company
— be sure to ask what discounts are available. Most insurers
offer a discount for "protective devices," including smoke
and fire detectors, burglar alarms, and fire extinguishers. Some insurers may offer discounts to policyholders who are over age 55 and retired. Others may offer a discount if you buy both an auto and renters policy (called a multiline discount). Last updated Feb. 21, 2001 source: insure.com |
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