Insurance, by definition, reimburses the policy holder the monetary value for possessions that are damaged in case of fire, theft, extreme weather, and/or other related events. Most individuals would not consider driving a vehicle without a current auto insurance policy in force; as well, life insurance assures that loved ones will be provided for in case of death. Insuring one’s home (includes personal possessions) is mandatory with mortgage companies; one can only deduce that renter’s insurance should be considered just as essential to have in place.
Insurance coverage varies with each insurance company. Generally, damage from fire, burglary, vandalism, and extreme weather conditions will be covered. Many policies will also include a personal liability clause. This feature covers medical and other expenses for a third party who may become injured at the rental unit. Renter’s insurance policies do not cover damages from a flood. Many renters believe that the property owner’s insurance policy will cover their personal items in case of fire or other damage. Rental property insurance policies do not cover the personal effects of the tenants. Many property leases will state this fact and suggest renter’s insurance be purchased by all tenants.
When considering a renter’s insurance policy, an important factor to be aware of is if the policy reimbursements will be paid using the item value method or by replacement cost. The item value method is calculated using the value of the item today, not the cost of the item when it was purchased. The replacement value would be determined by the amount it will cost to replace the item today.
A renter’s insurance policy will also site a required deductible amount; that is the amount the insured has to pay at the time a claim is made. This amount can vary by hundreds of dollars; compare the deductibles when shopping for a policy.
The annual premium for a renter’s insurance policy is extremely affordable, generally from $100.00 to $300.00 a year. The annual premium, of course, is based on the amount of coverage that is requested, the applicant’s state of residence, and the proximity of a fire department and fire hydrant from the rental unit. A college student would generally own a limited amount of furniture; however, computer equipment, textbooks, clothing, televisions, sporting gear, and stereo equipment can be very costly to replace; calculate the total cost of the items and choose appropriate coverage. When acquiring renter’s insurance, request a quote from several companies. Write down the annual premium of each company, coverage limits, deductable amounts, whether the reimbursement is calculated on the value today or the replacement value, and the types of damages that are covered; then, compare. The least expensive policy may not provide the necessary coverage.
Photographs of the living space should always be taken with a camera that will imprint the date on each photograph. A separate photograph of each expensive item, such as a computer, television, or stereo system, should also be kept on record. A written list of items in the unit, or inventory, should also be recorded and updated. Store the photographs, the inventory, and the renter’s insurance policy together in a safe place, preferably a safe deposit box, away from the rental property.
The “it won’t happen to me” theory has backfired many times. The fact is that property damage is a very frequent occurrence. Protecting one’s personal property with a renter’s insurance policy is responsible and prudent.