Many people who rent apartment units or other housing mistakenly assume that the owner's insurance policy will cover the loss of personal property after a devastating event (fire, flood, break-ins, etc.). The reality is that renters are not automatically protected--the landlord will only be reimbursed for the structure itself, not the renters' belongings. This is why renters are strongly encouraged to purchase a protective policy called renters insurance.
Renters insurance is a low-cost insurance policy which covers almost all personal property inside an apartment and liability for medical or legal expenses if a visitor is injured. A typical insurance policy may cost from $150 to $300 USD a year in premiums, but covers up to $35,000 USD in property losses and $100,000 in liability claims against the renter. Insurance companies can and often do reject applications for this type of insurance based on group housing situations or duplicate coverage from a renter's parents. College students seeking insurance for off-campus housing may find it difficult to obtain, and those in dormitory settings may be rejected out of hand because of the increased risk of horseplay and theft.
The ideal candidates for renters insurance are young married couples and those with few extremely valuable items to insure. Insurance agents strongly suggest that renters add on special riders (additional insurance protection) for items valued over $5000 USD. Items which may be stored inside or outside an apartment, such as bicycles or laptop computers, can often be covered by this type of insurance, but personal vehicles are generally not protected.
One important thing to keep in mind about loss of property coverage is the payout policy. Renters insurance policy claims may be paid out as 'actual cash value' (ACV) or 'replacement cost'. A policy which pays the actual cash value of a damaged or stolen item will usually have lower premium payments per month, but the payout will be based on the original price of the item. For example, a stereo system purchased for $800 USD eight years ago is not going to be worth $800 today, due to depreciation. An ACV policy will only pay the holder the original $800 value, which may or may not be enough to replace the unit.
For those who have renters insurance with a 'replacement cost' payout plan, the insurance company will pay for an equivalent stereo system at today's prices. The premiums for such a policy are higher, but renters with valuable equipment and jewelry may find the payout terms to be worth the expense.
Many renters discover that the liability coverage provided by renters insurance is even more valuable. Landlords are generally responsible for accidents and dangerous conditions on public property, but this protection ends right at the renters' sidewalks or doorways. If a visitor slips and falls on a renter's floor then decides to sue for damages, the insurance should cover the medical expenses. This may just be an exchange of information between insurance companies, not an actual civil law proceeding.
Another important benefit of renters insurance is often called 'additional housing expenses'. If a faulty plumbing system or a damaged roof renders an apartment temporarily uninhabitable, those with renters insurance can move into alternative housing while repairs are made. The insurance company will usually pay the rent for a specified amount of time, possibly up to 12 months. The actual amount of rental assistance is calculated as a percentage of the total coverage, so renters of more expensive apartments and condos should consider asking for a higher amount of insurance coverage.
