Renters Beware: You Need to Buy Insurance Too

Renting without insurance can be an issue
Renting without insurance can be an issue

Sometimes, mistaking a myth for a fact can be extremely costly.

Take, for example, the myth that the only people who need to insure themselves against fires, floods or other disasters are homeowners.

Everyone realizes that a property owner needs an insurance policy, but many renters overlook the fact that they, too, need coverage.

"Some think that because the landlord has an umbrella policy, they don't need additional coverage," explains Susan Voss, president of the National Association of Insurance Commissioners, the organization of insurance regulators. "Then there are college students who believe their parents' homeowners insurance covers their apartment."

"People somehow don't think about renters insurance because their home is not a house that they own," she says. They forget that while they may not own the building, they own the contents, and replacing them could be a major expense. Misconceptions about renters insurance can prove expensive when the unexpected happens. "A lot of the people in the recent tornadoes didn't have renters insurance," says Voss.

The number of renters is growing nationwide -- it's up more than 10% between 2004 and 2009, according to Traveler's Insurance -- and in today's economy, many of them might not be on the lookout for one more bill to add to their budgets. But this is one they can't afford to ignore, so forget the myths and go for the facts.

Not Buying Insurance for All the Wrong Reasons

In a recent survey by MetLife (MET) of people who didn't have renters insurance, 33% of respondents said they thought renters insurance was too expensive. Not sure where they were looking, or if they were just guessing. But, at $125 to $200 a year for a policy covering up to $25,000 of contents and $300,000 in liability protection, there's no need to crack your piggy bank, says to Jeffrey Zander, an independent insurance agent with Zander Insurance Group, You could spend that much on a couple of nights out on the town.

Nearly one-fourth of folks surveyed said they thought they were covered by the landlord's policy. Wrong again. The building is protected, but not your stuff. Furthermore, don't assume that if your roommate has a policy, that you're covered too.

Some 20% thought their personal property wasn't valuable enough to warrant insurance. Do the math. If you had to replace your entire wardrobe, furniture and more -- not to mention the cost temporarily moving somewhere else -- could you afford to? The costs add up. In fact, insurers say that the average person has $20,000 in possessions.

What's Covered, What's Not

What's important, is to know is what's covered by your policy and what isn't. Generally, a basic policy will cover clothing, furniture, computers, electronics and such. You can also get liability protection to protect you if someone is injured in your home.

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For items like antiques, expensive jewelry, firearms or special equipment, a separate rider might be necessary. Furthermore, some insurers such as Traveler's offer renters policies that cover you for a range of other issues: losses from credit card and check forgery; additional living expenses if you need to stay in a hotel after an incident, and the meals you have to eat out since you can't cook, among others.

While the circumstances under which you're covered varies, some examples include fire, lightning, windstorm or hail, freezing of plumbing system, ice, snow or sleet damage, and theft.

Be clear about what's not covered. For example, jewelry damaged in a fire would likely be covered, but if you simply lost your jewelry, it wouldn't, says Lisa Karpienski, renters insurance product manager for USAA.

Again, policies vary, but generally, causes of loss that are not covered are intentional loss, pollution, lead exposure, flood,
earthquake, and neglect, explains Mario Morales, manager of corporate underwriting for MetLife Auto & Home.

"USAA is unique in that our standard renters policy provides coverage for floods and earthquakes," points out Karpienski.

By the Numbers

As with any product or service, shop around for the best deals. Keep in mind that the higher the deductible you suck up, the lower your premium will be. You'll benefit too, if you bundle your policy with the same insurer that covers your car, for example. Having safety devices like a smoke detector can lower premiums.

You want to be sure your policy offers replacement value, meaning you'll get enough money to buy new stuff at today's prices, not yesteryear's.

Know what the property limits are of your policy, and whether items in your garage or a separate storage unit in your complex would be covered, adds Voss.

Lastly, don't leave your coverage level to guesswork. Valuables should be appraised so you have a basis for assessing their replacement costs. Also, keep receipts for big-ticket items.

Still wondering about renters insurance? There's really nothing to debate. You may not have purchased a home, but for a mere pittance, you can purchase peace of mind.