When disaster strikes, it doesn’t care if you rent or own your home. Renters face the same risks as homeowners. Your landlord or condo association may have insurance, but it only protects the building structure, not your personal items.
Imagine losing all your furniture, clothes and other belongings in a fire or other disaster. Renters insurance, like homeowners insurance, is meant to rescue you at these times of disaster. Yet only 41 percent of renters have insurance, according to the Insurance Information Institute.
What renters insurance covers
There are several types of home and renters insurance policies. A policy called the HO-4 is designed for renters and covers damage from 16 types of perils:
- Fire or lightning
- Windstorm or hail
- Riot or civil commotion
- Damage caused by aircraft
- Damage caused by vehicles
- 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)
Additional benefits of renters insurance
1. Renters Insurance also usually provides Off-Premises Coverage
Renters insurance does more than cover the cost of lost or damaged possessions in your home. There is coverage if your bicycle is stolen from a bike rack at the park, or if your laptop is taken from your car while you're at the supermarket.
2. You Can Be compensated if you’re Forced to Relocate
Most renters policies provide additional living expenses coverage if your home becomes uninhabitable due to an event such as vandalism, theft, fire or water damage from home utilities. This benefit usually includes the cost of living expenses, up to your policy limits.
This coverage typically is limited to 30 to 50 percent of your insured personal property. For example, if your belongings were insured for $100,000, the limit on additional living expenses would be $30,000 to $50,000, as outlined in your policy.
What renters insurance won’t cover
Just as with home insurance policies, renters insurance won’t cover damage from “earth movement." That movement includes earthquakes, mudslides and landslides.
Also typically excluded are:
- Nuclear hazard
- Neglect, meaning your failure to save your property at the time of loss or after.
- Intentional loss, meaning your intentional destruction of your property.
- Governmental action, such as seizure of your property.
In some coastal regions, you might need to buy additional coverage for hurricane-related wind damage.
Actual cash value vs. replacement cost
Knowing what types of problems are covered is a good first step to deciding on a policy. Next, consider how you want your belongings to be covered: "actual cash value" (ACV) or "replacement cost coverage.”
As the name implies, ACV coverage will pay only for what your property was worth at the time it was damaged or stolen. So, if you bought a television five years ago for $500, it would be worth significantly less today. While you'd still need to spend about $500 for a new TV, your insurance company will pay only for what the old one is worth, minus your deductible.
Replacement cost coverage, on the other hand, will pay what it actually costs to replace the items you lost (minus the deductible). Replacement cost coverage will cost you more in premiums, but it will also pay out more if you ever need to file a claim. Let your Arrow Insurance agent know about any particularly valuable items you have. Jewelry, antiques and electronics that might be covered only up to a limited amount which could be less than their actual value.
Coverage with dollar limits
You’ll likely find that your renters insurance policy states specific dollar limits for certain items. If your items have more value, you’ll need to purchase riders to fully cover them. Here are examples of items that often have dollar caps on coverage, along with typical limits:
- Cash - $200
- Securities, passports and stamps - $1,500
- Theft of jewelry, watches and furs - $1,500
- Theft of firearms - $2,500
- Theft of silverware, goldware, flatware: $2,500
- Unauthorized charges to your credit card: $500
Without riders for these expensive items, you can't recover the full loss if it's beyond your policy limit.
Additional renters insurance benefits
Liability protection for property-damage and bodily-injury lawsuits against you is generally standard with renters insurance policies. This means if someone slips and falls in your unit and sues you, you're covered for any costs, up to your liability limit. The insurance company will also pay for your legal defense.
If your apartment or condominium becomes uninhabitable due to a fire, burst pipes or any other reason covered by your policy, your renters insurance will cover your "additional living expenses." Generally, that means paying for you to live somewhere else.
To ensure you’re compensated for any belongings you lose from a fire, storm or other catastrophes, you should inventory all of your personal belongings. List each item, its value and serial number when possible. Photograph or videotape each room, including closets, open drawers, storage buildings and your garage. Keep receipts for major items in a fireproof place.
Saving money on renters insurance
Just like homeowners insurance policies, your renters insurance premium depends on a number of factors: where you live, your past claims, your deductible, your insurance company and whether you need any additional coverage.
Common ways to save on renters insurance include:
- Increasing your deductible (the amount you pay before your coverage kicks in).
- Asking for discounts for smoke and fire detectors, and security systems.
- Buying your car insurance from the same company, called a bundling discount.
- Paying your renters insurance bill in full rather than in installments.