Many renters are not aware that their landlord’s policy leaves tens of thousands of dollars of their personal belongings unprotected. The average renter has $20,000 of personal items that would not be included under a landlord’s policy. The landowners’ policy also does not offer you any liability protection in the event someone is injured in your apartment or if you cause property damage. Like homeowners insurance, the main purpose of renters insurance is to shelter the policyholder’s personal belongings against vandalism or theft. These plans also usually look after your personal property such as stereos, CDs, DVDs, cameras, appliances (that don’t come with the apartment), furniture, silverware, clothing, and books. You are usually sheltered against wreckage that stems from theft, water damage, smoke, and fire.
In the insurance industry, the typical renter’s policy is known as “HO-4” coverage. This type of plan will shelter you from 17 different perils, including:
- Falling objects
- Lightning or fire
- Theft
- Vandalism
- Wind and hail
Differentiating Between Coverage Types
Every basic renter’s policy will come with two main protections: physical damage and liability coverage. The physical damage component of the plan will pay out benefits if the belongings you store in your rental are lost or wrecked. For instance, if your computer equipment were stolen from your apartment, the physical damage portion of your policy would reimburse you. Secondly, renters’ policies offer liability coverage. This portion of the plan will pay for your legal defense and any judgments against you if you are sued for an accident or injury that occurred on your property. Additionally, the following options are typically included in a standard plan:
- Personal Property: Protects your possessions from theft, vandalism, water damage, etc. If your belongings are stolen or wrecked, you can file a claim to get reimbursed for the loss. The amount of your reimbursement will depend on your deductibles and the type of property coverage you select. With actual cash value coverage, you will only be reimbursed for the current value of your possessions less depreciation. With replacement cost coverage, you will be reimbursed for what it would cost to buy the item new today.
- Personal Liability: Protects you and any visitors to your rental property. If a guest is injured on your property, renters insurance will pay for the medical expenses and any judgments against you if a lawsuit ensues. Your legal fees will also be taken care of. Most policies offer around $100,000 of personal liability coverage.
- Improvements Coverage: Protects the policyholder from lawsuits if his/her property is damaged. This will then pay for any improvements or repairs that need to be made to restore the property.
- Fire Legal Liability: If you are found liable for a fire that occurs on your rental property, this provision will pay for any judgments against you and cover the damages that resulted.
Am I Included in My Landlord’s Policy?
A common objection given to the purchase of rental insurance is that the landowners’ policy already safeguards everything. This is untrue. The property owners’ plan strictly protects the structure of the apartment building and nothing else. Some policies don’t even go that far if a tenant is responsible for causing the situation. In other words, if you leave your bathtub water running and do water damage to your apartment and the one below, you might be liable.
Some renters justify going without rental insurance because they rationalize that they don’t have anything valuable enough to warrant safeguarding. But did you know that the average renter has almost $30,000 of personal belongings that are not insured by the landlord’s policy? Could you afford to pay $30,000 to replace your possessions? More than likely, the answer is no. Aside from your regular possessions, if you have especially valuable items, like jewelry, collections, furs, etc., you should also consider a rider on your plan. A rider allows you to bolster your protection for certain items of extraordinary value.
Before you get quotes, you should try to estimate the value of your personal belongings by taking a room-by-room inventory. This will help you get an idea of how much protection you need, and provide you with documentation of the value of your items.