Renters' Insurance
Now that you have a place, should you do something to protect your assets? Do you need renters' insurance? Assessing insurance policies can be time consuming and confusing. Practical U has researched the different policies available and compiled a list of quick and easy advice.
College students are generally easy targets for theft because they have laptops and ipods, rarely have security systems, and can be lackadaisical about locking doors and windows. Do you want to shell out the extra money per month to protect yourself? Check out this information:
Contents
Overview
Renters' insurance is an insurance policy purchased by tenants to cover personal property loss or damage, as well as expenses incurred due to inadvertent injury by non-residents. It generally covers your personal property as opposed to you landlord's insurance, which will cover the physical building.
Coverage
Renters' insurance typically covers:
- Theft
- Fire or Lightning
- Windstorm or Hail (in some areas prone to hurricanes, you may need to purchase a separate policy to cover wind damage)
- Explosion
- Riot or Civil Commotion
- Damage cause by Aircraft or Vehicles
- Smoke
- Vandalism or Malicious Mischief
- Volcanic Eruption
- Falling Objects
- Weight of Ice Snow or Sleet
- Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning, or automatic fire-protective sprinkler system, or from a household appliance
- Sudden and accidental tearing apart, cracking, burning, or bulging of a steam or hot water heating system, an air conditioning or automatic fire-protective system
- Freezing of a plumbing, heating, air conditioning or automatic, fire-protective sprinkler system, or of a household appliance
- Sudden and accidental damage from artificially generated electrical current (does not include loss to a tube, transistor or similar electronic component)
Base Policy Typically does not cover (you will need a supplement or a separate policy to cover these):
- Flood
- Earthquake
- Hurricane
- Back-up of sewer or drains
- Very expensive items (e.g. jewelry)- the insurance policy will typically only cover individual items up to $2,500. You will need to purchase a floater if you want full coverage on very expensive items.
Remember, these are only the items that are typically covered. Coverage varies from policy to policy, so be sure to check before you sign up.
ACV vs. Replacement Cost Coverage
Another important distinction on plans is between Actual Cash Value and replacement cost coverages. ACV pays to replace your possessions minus depreciation up to the limit of your policy. ACV coverage therefore may not pay enough to actually replace the items. Replacement cost coverage pays the actual cost to replace your possessions up to the limit of your policy. Replacement cost coverage is therefore more expensive than ACV coverage.
Cost of Premium (Amount you pay each month)
Price depends on numerous variables, including the amount covered. Keep the premium low by having a high deductible (amount you pay before insurance policy pays), having house protective devices (fire extinguishers, smoke alarms, deadbolts etc.) and using the same company as your auto/motorcycle insurance policy. Here are some examples of different plans and variations in price due to different factors:
- House in suburban Virginia
- House in Maine city
- Apartment in Washington, DC
Should You Purchase Insurance?
You typically get insurance for things that you cannot afford to lose. You are willing to pay a small amount for an insurance policy because you will not be able to pay the full amount if the item(s) are stolen or damaged. If you will not be able to replace an essential laptop, tv, stereo or couch, then you should get insurance. If all the items in your apartment are either non-essential or easily replaceable, then insurance may not be for you. The insurance company takes a profit off the top of the insurance policy, so if you rented 1,000 apartments and had renters' insurance policies on each one, you would almost certainly have a net loss after insurance payouts. Your expected value is negative.
However, insurance can also be helpful for peace of mind. If you are constantly worried about theft, fire, or damage from parties, then purchase an insurance policy and relax and enjoy college.
How to Get Insurance
Most major insurance companies provide free quotes online. Start with the company from whom you purchase auto/motorcycle insurance. They will usually offer a discount. You can also get a head start by talking to the previous renters. You can ask if they purchased an insurance policy and whether they were happy with the price, service, and coverage.
For the quote you will need to know:
- Building construction type (brick, wood, vinyl siding etc.)
- Primary and auxiliary heat sources
- Fire district
- Distances to fire department and fire hydrant
- Do you plan to have animals or pets?
- Protective devices (deadbolts, smoke detectors, fire extinguishers, central station fire or burglar alarms)
- On-premise security
- Amount of personal property coverage (value of your personal property)
- Amount of personal liability coverage (liability in case you are sued by a non-resident who is injured at your apartment)
- Amount of medical payments coverage (covers medical payments for a non-resident injured on the premises)
- Amount of deductible (the amount that you will pay in an insurance claim before the insurer pays out)
- Value of additional expensive items that you would like insured
- Do you want additional insurance in the event of damage due to drain or sewer backup?
Tip: Unfortunately, there is usually no advantage to lying (at least blatantly) about your information when obtaining insurance coverage. When you do make a claim, the insurance company will typically make an inspection. It may turn up that you were not paying for what you had hoped. In other words, you were paying but were not covered— the worst case scenario.
Renters' Insurance FAQs
- How much does renters' insurance cost?
- Renters' insurance is usually very cheap. You can typically get insured for $200 a year or less. Decreasing coverage will obviously decrease your premium.
- Is there a financial benefit to installing smoke detectors, fire extinguishers, or deadbolt locks when purchasing renters' insurance?
- The answer to this question depends on from what perspective you are looking at the financial benefit. It is true that, almost universally, insurance providers will provide a discount on your premium if you have any of these protective devices. However, the discount is small. Cheap deadbolt locks will cost you about $5 a piece, while cheap smoke detectors will be about $8 a piece. A fire extinguisher will be a minimum of $40. You will need a smoke detector on every floor, and likewise a deadbolt lock on every external door, to receive the discount. However, the discounts are very small, ranging from $1-$10 a year. Therefore, from a strict financial sense, you will pay more purchasing and installing the devices than you will gain in insurance discounts. However, you can probably convince your landlord to purchase any of these, or offer to purchase and install them yourself, then deduct the cost from rent. This method will make the discounts financially beneficial. Regardless, we recommend that you have all three of these safety devices for safety purposes alone. Any financial benefits should be secondary.
- Can all roommates share the same renters' insurance policy?
- Probably not. Many policies only cover the one policy holder and relatives. Check with your insurance provider, but you will probably need insurance policies for each tenant.
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