For young upwardly mobile professionals, renting a place to live has become commonplace and yet rent insurance has not. Why is this? For the most part, young people starting out in their first jobs are not aware that they even need renter’s insurance, and if they do consider it, they dismiss as pointless, since they don’t have much to lose.
However, if you’re thinking that your landlord’s insurance is enough, and that you don’t have to break a sweat since all of your furniture belongs to your landlord, you are way off base. Your landlord’s insurance may be great and it will cover any damage to their property, but sadly, it will not cover your possessions. If you have valuables in a rented apartment, you need to insure them yourself.
If you’re a single parent, you’ll be in the same predicament, even more so since you have a child and the probability of damage to property is higher. Also, you need to consider that the landlord’s insurance is covering their building, not your property, so if there is an accidental fire and your child’s computer is destroyed for example, without rent insurance you will have to bear the costs of replacing it yourself.
It’s not just burglaries or fires you need to consider as a renter, but also damage as a result of accidents. Imagine what would happen if you invite the guys around to watch football and one of them accidentally knocks over your big screen TV. Who is liable? Your landlord’s insurance won’t cover it, but if you have made provision, then your rent insurance will. What would you do if a freak windstorm blew in through an open window and destroyed your laptop, your stereo system and other expensive personal accessories? Rent insurance is a necessary expense, and here we will explore why.
What is covered?
The HO-4 policy or renter’s insurance ensures that you are paid out a sum that allows you to replace lost valuables in the case of accidental damage or theft. Some of the scenarios where this may happen may seem familiar to you, from theft and accidental fire to wind or hail damage and water damage. But there are some cases in which you will need insurance to cover you for things you would think only exist in movies, such as riots, explosions, accidental aircraft damage, volcanic eruptions and even electrical surge damage. Wouldn’t it be awful to find your computer had been damaged by an electrical surge that you weren’t covered for?
In the case that these disasters or incidences happen, rent insurance ensures that you are covered, and will generally include any valuables you choose to insure, from your computer and TV to personal jewellery, valuable books or even family heirlooms. The amount you choose to insure for depends on the value amount of the item, and the amount you’re willing to pay monthly to take care of it.
Renter’s insurance generally also covers you for liability, if included in your policy. If for example, you have a plant outside your door that is leaking water and a visitor trips over it and hurts themselves, they could sue you. Your landlord is not responsible for that damage since the plant is yours and you are responsible for its upkeep. However, if you included liability cover in your renter’s insurance, you will be covered.
How much do you get if you claim?
In terms of the value of items that are insured, you will be able to claim one of two amounts, depending on the item. Of course, this is all pre-determined and will influence your premiums. If you have an ACV policy, your insurance company will give you the actual cash value of your property. If your TV was old before it was damaged or stolen, the cash value would be pretty low, but your premiums will have been pretty low too. If you are paying higher premiums for replacement costs, the item that has been damaged or stolen will be replaced.
If you’re unsure as to which type of insurance you need, take a day to check everything you own carefully. You don’t need to insure every single item of property you own. You may discover in fact, that some items are not worth replacing. If you have an old computer that is practically worthless, and you’ve been saving up for a new computer, don’t waste money on insuring the old one. It will just raise your premiums.
How high are the premiums of rent insurance?
The premiums you pay monthly start at a basic rate and then increase based on what you want insured. This all depends on the values assigned to the items and whether you are insuring them for the actual cash value or the replacement costs. Also important to note here is that the cost of insurance rises depending on the area you are in and any previous claims.
Unfortunately, the more you claim, the higher your premiums will be. This is because your risk factor increases whether it is your fault or not. The insurance company needs to increase your premiums to ensure that they can cover the cash value or costs of replacement since your probability of liability has increased. The same is true for auto insurance. If you have a bumper bashing that is not your fault, your premium will still go up because the insurance company has had to pay out. The added expense to them means added expense to you.
If you live in an area that is prone to thefts, as determined by your insurer, your premiums will also be higher. Again, this is because the insurance company has to cover themselves and the probability of theft or damage is higher. Of course, each insurance policy is different and what may apply in one state may not apply in another. Think about Seattle where it rains more than in other states. Here, the rent insurance premium for water damage will probably be higher as it is more likely. The same is true of New York, which will have higher premiums on theft insurance, due to the nature of the city.
How do I control the costs of my rent insurance?
Your rent insurance premiums can skyrocket if you don’t take control of them. That’s why before you call up your insurance company and ask for this kind of insurance you need to know what to insure. Start by taking inventory of all of your possessions. Start with the bigger, more obvious items such as televisions, computers, DVD players and other big items that are expensive and will cost a lot to replace. Then move onto the smaller items such as jewellery, expensive books, portable music players and other small but expensive items. If you’re unsure about whether to insure an item, try to determine its value. If you could easily replace it, you don’t need to insure it, but if the cost of replacing it would be high, then pay the premium for insurance.
When you make your rent insurance inventory, make sure you document where everything is. You can do this by taking photos of all your insurable items and then placing them on a drawn map of your home. When you sign the insurance policy, email the photos to your insurer or even to yourself to ensure you mark the date you owned them. In that way, if you do lose the items in a fire, theft or natural disaster, your insurer cannot dispute that you had them in the first place, and the make and model of the items. The more you document, the higher the chances that your insurance will pay out.
Insurance payouts can be a real headache because you’re never too sure of what is covered and what isn’t, but if you are properly prepared and you do your homework, you always increase your chances of being covered. There are some incidents that cannot be foreseen. Take the recent riots in London as an example. Despite the best efforts of police, some stores and houses were damaged. If this were to happen in your state, you would want to be reassured that your house would be covered.
Earthquakes, volcanic eruptions, floods and other natural disasters are a reality of life, and more and more we have seen their impact. Hurricane Katrina was only one of a long list of natural disasters this year. Add to the potential natural disasters, thefts and human accidents and you could start to panic under the pressure of all the ways you could lose your property. A good insurance company will be able to put your mind at rest by covering all of your possessions, so that no matter what happens, you can replace what you worked so hard to buy. Rent insurance is an absolute necessity, and even more so for people living on their own such as single parents, because it gives them peace of mind, both for themselves and for their children.