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Renters
Insurance:
Shattering a Few Myths
Many renters overlook or underestimate
their insurance needs because they believe only "homeowners"
need insurance. However, just as most of us would not think of
owning an automobile without auto insurance, renters need protection
for their personal possessions and from liability. Even the smallest
apartment can easily contain personal property worth thousands
of dollars. And all of us are at risk for liability. This information,
prepared by the Independent Insurance Agents of America, provides
you with important information about renters insurance.
Common
Renting Myths
MYTH #1 - Insurance
is too expensive. Some renters fail to insure their personal possessions
because they believe insurance is too expensive, but renters insurance
is typically available for as little as $100 a year.
MYTH #2 - The insurance
carried by my landlord protects me. Many renters think they are
protected under their landlord insurance policy. However, the
property owner insurance covers the building itself and seldom
tenant possessions. Clarify this with your landlord before signing
a lease.
MYTH #3 - My landlord
is liable if someone trips in my apartment and gets injured.
Again, the owner policy may specifically exclude liability for
something that occurs within your rented residence. You could
be held liable for injury to another person or damage property
of another person if the incident occurred within your rented
residence.
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Look At Premiums
Renters insurance, because you are
not insuring a building, is surprisingly inexpensive. Of course,
like all property protection policies, the value of the property
to be insured and other risk factors are weighed by the insurance
company to determine your premium. As with your automobile insurance,
your renters deductible is the amount you agree to pay in the
event of a loss. For example, if your $2,000 stereo is stolen
from your home, and you have a deductible of $250, the insurance
company would pay you $1,750, which is $2,000 minus your deductible.
Coverage
For All
Renters insurance offers the same
general personal property coverage and liability protection as
a homeowners policy. Property insurance covers the cost of repairing
or replacing personal property that has been damaged, destroyed
or stolen. Your property is covered both within your home and
when you are traveling. You also receive liability protection.
If someone suffers an injury or damage to their property because
of something you did or did not do, you could be liable. If, for
example, the oak dresser which belonged to your grandmother dents
the walls in your apartment lobby while you are carrying it into
the building, you could be held liable. Likewise, if a fire starts
in your apartment and spreads throughout the building, and you
are deemed at fault, you could be held liable for damage to the
entire building.
In addition, most renters policies
include coverage for additional living expenses (also called "loss-of-use"
coverage) if you are forced by fire or other damage to temporarily
live elsewhere.
Alterations
For A Better Fit
Most policies limit the amount of
reimbursement for theft of valuable items, such as jewelry, furs,
silverware and guns. If you have some particularly valuable items
in these categories, you may need to purchase additional coverage
called a "floater." These types of policies cover each
item individually and are usually quite inexpensive. Other additions
to your renters insurance that add or change the policy provisions
are called endorsements. Some endorsements extend the number of
risks insured against, some cover property otherwise excluded
and some increase the amount the insurer will pay for a covered
loss.
Also, it is important to note that
the standard policy excludes damage from earthquakes and floods,
so talk to your independent insurance agent about coverage for
these incidents.
What
Is It All Worth?
If your property does get damaged,
destroyed or stolen, the insurance company will use one of two
ways to determine its value:
- Actual Cash Value
- The replacement cost of the item minus depreciation. For example,
a new television set may cost $500. If your 7-year-old TV set
gets damaged in a fire, the value of it might have depreciated
50%. Therefore, the amount of your coverage for that set would
be $250.
- Replacement Coverage
- The cost of replacing an item without deducting for depreciation.
So current cost for a TV set with features similar to the 7-year-old
one damaged by fire would determine the amount of compensation.
If it still costs $500 today, that would be the amount of your
coverage. You can select which type of coverage you would prefer.
Having replacement coverage adds only about 10% to 15% to the
cost of the premium and may well be worth this slight increase.
Renting
With Roommates
Usually, it is best if all roommates
are on the same policy although it is possible for each to purchase
his or her own coverage. If you do need to "go it alone,"
you alone receive the security of renters coverage.
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Final Note
At least once during a lifetime most
people will rent a home. Paying rent instead of a mortgage payment
does not make your personal possessions any less valuable. Should
your belongings be damaged or destroyed, or should someone suffer
an injury in your home, renters insurance can offer the peace
of mind of knowing that you are protected. Your independent
insurance agent can help you find the best combination of coverage
and price to meet your rental insurance needs.
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