Why Is Renter’s Insurance Important?
Renter’s insurance provides a large amount of coverage for a small amount of premium. Yet only about 43 percent of renters actually had renter’s insurance in 2006, though the annual average premium for renter’s insurance was only $182 in 2007, according to the Insurance Information Institute. Renter’s insurance is important because it not only protects the renter, it protects the landlord for any damages the renter causes.
- Chances are that if the building you live in burns to the ground, destroying of all your personal property, you will not have enough money to adequately replace these items. Renter’s insurance is designed to reimburse a tenant for his personal property in case of fire, theft or other covered peril, and to provide liability coverage if he is found responsible for the loss.
Renter’s insurance also provides loss-of-use coverage to pay living expenses if the renter can’t occupy the home because of a covered loss.
- Additional Coverage
- Although the basic renter’s policy covers personal property, loss of use, personal liability and medical payments, you can often request additional coverage, including coverage for refrigerated products that spoil because of a covered loss; waterbed liability for damage to the premises if there is a leak; professional liability for barbers, beauticians, teachers and school administrators who work with the public on a daily basis; and even watercraft liability for boats or personal watercraft.
You also may schedule valuable items such as jewelry, personal computers and art onto your renter’s insurance. Scheduled items are not subject to a deductible, and they are afforded a broader amount of coverage including mysterious disappearance. Most companies do require an appraisal if the item’s value is above a certain limit.
- Not only does renter’s insurance provide protection for your personal items and liability for your negligence, it will also pay defense costs if someone is injured on the property, or if you are sued because of damages you cause to the dwelling.
Imagine that the rental house where you live burns because you accidentally left the stove turned on when you ran to the store. The company that insures the dwelling for its owner is likely to pay for the damage and then sue you to recover that amount. Your renter’s insurance will pay for any defense cost, plus the judgment awarded by the court, up to the limits of your policy.
- Renter’s insurance is written on a named-peril basis, meaning the cause of the claim must be stated in your policy for it to be covered. Common named perils include fire, smoke, explosion, lightning, wind, hail, vandalism, theft, burglary and water damage from plumbing and heating systems. If the peril is not listed in your policy, it isn’t covered.
- Covered losses are generally settled on either an actual cash-value basis or a replacement-cost basis. Replacement cost pays to replace the item with a similar item regardless of the cost, up to the limit of your policy. Actual cash value pays the replacement cost minus depreciation for wear and tear. Always ask your agent whether you have replacement cost; it usually can be added to the policy for a small charge.