Renters insurance is designed
to cover your personal property, such as televisions,
stereos, clothing, furniture, jewelry, carpets and
appliances. Like homeowners insurance, it also covers
unintentional or non-negligent damage you and your
family members — even pets — do to others
or their property.
Named Perils
Typically, renters insurance provides coverage when
your belongings are stolen or damaged by one of
several causes specifically stated in the policy.
The industry refers to these causes as "named
perils." They generally include:
- Fire or lightning
- Explosion
- Smoke
- Vandalism or malicious mischief
- Theft
- Falling objects
- Weight of ice, snow or sleet
- Damage caused by vehicles or aircraft
- Windstorm or hail
- Riot or civil commotion
- Volcanic eruption
- Freezing or accidental overflow of water from
a plumbing, air conditioning or heating system,
or household appliances
- Bursting hot water tank or heating system
- Sudden and accidental damage from artificially
generated currents to electrical appliances
and wiring
Loss of Use
In addition, if damages to your apartment force
you to live elsewhere while repairs are being made,
most renters’ policies reimburse you, up to
certain limits. The amount you receive is intended
to cover what you must spend above customary living
expenses. Insurers call this coverage "loss
of use."
Protection against theft or unauthorized use
of credit cards is also a part of most renters
policies, as is coverage for losses from check
forgery and accepting counterfeit currency. The
customary limit for this type of coverage is between
$500 and $1,000.
Endorsements
Policies come with a wide variety of coverages,
options and add-ons — called endorsements —
that let you tailor coverage to fit your needs.
Exact coverages, policy limitations and exclusions
vary, according to your insurer and individual state
insurance rules. For specific information on exact
coverages and costs, consult your insurance company
representative.
Additional Coverages
In addition to the basic coverages, some renters
policies may include the following provisions at
no extra cost and with no extra deductible:
- Food Spoilage
Covers the contents of your freezer or refrigerator
(up to a specific amount), in case of a power
failure. Customary coverage limit: between $500
and $1,000.
- Lock Replacement - Covers lock replacement
costs if someone steals your house keys. Customary
coverage limit: about $250.
- Fire Department Service Charges - Covers
fire department charges when personnel are called
to protect covered property — located outside
the city limits or fire protection district
— against an insured peril. Customary coverage
limit: about $500.
- Reasonable Repair - Reimburses your
expenses if you must make temporary repairs
to protect your property from further damage
after a covered loss.
- Debris Removal - Covers the cost of
removing debris from property, up to certain
limits, following a covered loss.
Exclusions
Most policies exclude certain losses. These exclusions
generally include flood, earth movement, termites,
war, nuclear damage, radiation, deterioration, and
(for homeowners) damage to property on which a dwelling
sits. Check your policy for specific exclusions.
Flood Protection
Separate insurance is available to protect against
flooding. This is not the case with most of the
other exclusions listed above. The federal government’s
National Flood Insurance Program offers policies
covering damages caused by rising rivers, storm
surges or tidal waves. Related perils, such as mudslides,
may also be covered. As with all insurance policies,
flood insurance has limitations and exclusions,
so read your policy carefully. Many insurance agents
or companies sell these policies. If you have a
home mortgage and live in a Special Flood Hazard
Area, your mortgage company probably will require
flood insurance.
Wind Damage
Standard renters policies cover windstorms. However,
if you live in a hurricane-prone area — particularly
one situated adjacent to water — your insurance
policy may exclude wind damage. If so, you would
need a special policy to cover this type of loss.
Earthquake
For information on protecting personal property
against damage from earthquakes, see the section
on floaters and endorsements.
Deductibles
A deductible is the amount you agree to pay, out
of pocket, toward an insured loss. The idea is to
take care of the small, affordable losses yourself
and let the insurance company cover the larger,
potentially devastating ones. Deductibles apply
to personal property losses only, not to personal
liability claims. The most common deductible is
$250, though $100 and $500 deductibles are also
available. By raising your deductible from $250
to $500, you often can lower your premium by about
10 percent.
Actual Cash Value vs. Replacement Cost
There can be a big difference between the actual
cash value of an item — what it is worth
today, considering wear and tear, and age —
and its replacement cost — the cost
to replace the item with a new one at today’s
prices. Most renters policies insure your property
for its actual cash value, which reflects depreciation.
So, a television you bought for $300 five years
ago might only be worth $100 today, in terms of
its actual cash value.
To get replacement cost coverage, which will
pay to repair or replace your property with new
property, you must buy replacement cost insurance
as an endorsement to your policy. An endorsement
is an addition to your basic renters or homeowners
policy.
A replacement cost endorsement may add 15 to
40 percent to the cost of an actual cash value
policy. Some replacement cost policies limit coverage
to no more than four times the actual cash value
of lost or damaged items. For example, if your
eight-year-old television is only worth $100 today,
the policy would pay no more than $400 to replace
it, even if a comparable model now costs $600.
You must buy a minimum amount of coverage, usually
$12,000 to $15,000, to qualify for a replacement
cost option on your renters policy.
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