The Importance of Renters Insurance

The Importance of Renters Insurance

Your apartment complex or landlord requires it so you get the cheapest policy possible.  But do you really understand why you should have it?  Renters Insurance isn’t just to protect the landlord; it’s there to protect you!

A typical renter’s policy includes:

1.        Liability

2.       Personal Property

3.       Loss of Use

4.       Medical Payments to Others

5.       Deductible

Let’s look at these one at a time.

1. Liability coverage protects the landlord from a loss that you may cause.  But that’s only if you have enough coverage to cover the loss.  Otherwise, it pays up to the limit of the policy but then they can sue you for the balance.  So, in reality, liability is there to protect you from something you may do that causes a large loss.

For example, one of our recent claims was a tenant who fell asleep while a candle was burning.  The house caught on fire and caused substantial damage.  The tenant escaped thankfully but could potentially be liable for the cost to rebuild that house.  A liability limit of $100,000 (the typical limit on a renter’s policy) won’t be nearly enough.  That’s why we always encourage our renters to have at least $300,000 or $500,000 in coverage.  Most apartment complexes accept $100,000 and hopefully any damage would be less than that should the worst happen. 

Liability also protects you if an invited guest is injured in your home and you are found responsible.  This can include animal bites. 

2. Personal Property coverage is to replace your property if there is a sudden or accidental loss of what you own. Fire, water, burglary or theft for example. 

There are two types of personal property coverage to consider.  Actual cost value and full replacement value.  Actual takes the age of your possession and pro-rates the payout based on what it cost brand new and subtracts value based on the age (depreciation.)  Full replacement value gives you the full cost of what it will take to buy the same or similar item now.  For example, a new mattress costs $3,000 and has a life expectancy of 8 years.  There is a leak from your washing machine that floods your apartment ruining your 5 year old mattress.  If you have actual value coverage you will get $3,000 minus 5 years depreciation or $1,875 (for example).   Your claim pays $1,125 for your $3,000 mattress.  If you have full replacement you would get the full $3,000 or possibly more if that mattress costs more now to buy. 

3. Loss of Use pays for a place to live if your current place is unlivable due to a claim.  For example, if the flood in the example used above made your home uninhabitable the insurance company would pay for another place for you to live up to the limit of your policy.

4.  Medical Payments to Others coverage is a no fault coverage for medical expenses resulting from an injury within your premises.  Again, that pesky flooded apartment caused your girlfriend who is visiting your place to slip and fall, breaking her pinky finger and you had to go to the urgent care to have it splinted.  It costs you $1,000.  Your Medical Payments coverage would help pay for this.

5.  Your Deductible.  The deductible is the amount you are responsible for before the company begins to pay.  This can range from $100 up to $5,000 or more.  It’s your choice.  The higher the deductible the lower the premium.   

Of course, everyone’s situation is different and each of these coverages must be considered separately by the situation you are living in.  Even within the examples I’ve used above there are variations on how and what would be covered.  Remember, we are always here to answer your questions and I hope this makes Renter’s Insurance more understandable. 

 Contributed by Victoria Sutherland, Licensed Insurance Agent