Renters insurance is usually quite a bit broader than most people realize – and your landlord’s insurance quite a bit narrower.
The basic purpose of renters insurance is obvious: it covers the contents of your apartment in case they’re stolen, burned up, blown away or vandalized. What a lot of people don’t realize, however, is that most policies cover those same contents anywhere in the world. So if your laptop gets stolen during your surfing trip to Bali, it’s still insured.
Many tenants think that their possessions are already covered; after all, that’s what the landlord has insurance for, isn’t it? Except that it’s not. The landlord’s insurance typically covers only the landlord’s property. You’re left out in the cold when the gas heater explodes.
“Your landlord’s insurance covers his or her interest in the building,” explains Terry McConnell, vice president and manager, Personal Lines Underwriting. “It’ll protect the physical structure, but not your furnishings, clothes or possessions.”
Speaking of exploding heaters, if something happens to your residence that renders it temporarily uninhabitable, renters insurance will cover hotel expenses and other costs incurred until you can move back in.
Renters insurance also provides you with personal liability insurance — again, usually regardless of location. Many renters own pets and liability coverage is provided even when the friendly family dog might accidentally cause injury to someone.
“A lot of people overlook liability coverage, since liability claims are far less common than property claims,” says McConnell, “but they tend to be for much higher dollar values when they do come.”
All of this usually comes at a cost around $100 per year. If you have auto or life insurance through the same carrier, it may cost even less.
Limits and choices
There are limits, of course.
Policies generally start at around $25,000 in coverage, but a lot of people find that isn’t enough (your insurance Agent can help you figure that one out — make sure you talk to him or her before buying a policy, and any time you make a major purchase). Additionally, items like expensive jewelry, guns and silverware are limited to $3,000 when the loss is a result of a theft. Floaters can be added to a renters insurance policy to specifically cover these items for higher limits.
You’ll also have to choose between an actual cash value or replacement cost policy. In the event of a claim, actual cash value pays you what the lost possessions are worth: the amount you paid, minus depreciation; replacement cost coverage pays enough to replace your stuff.
“Replacement cost is one of the best deals in insurance,” says McConnell. “Your television, after depreciation, might only be worth $100 actual cash value, whereas a replacement for it might cost $500 — all of which is covered in a replacement cost policy.”
Your final choice is between named-peril and direct physical loss coverage. Named-peril policies list the things that are covered: fire, inclement weather, theft and so on. Direct physical loss coverage accounts for everything that isn’t explicitly excluded, such as floods.
“ERIE, like most companies, doesn’t offer a direct physical loss policy,” McConnell says, “but the majority of renters claims are for fire, lightning, theft or refrigerated food, all of which we cover.”
There’s a lot to think about when it comes to renters insurance. Your Agent can help you figure out the bulk of it, but it never hurts to have a little information up front. The following resources can help: