UPDATED: Nov 17, 2016
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What is Renters Insurance Coverage?
Renters insurance, also known as apartment insurance, serves a similar purpose as homeowners’ coverage. Rather than people who own their homes, it covers individuals and families that rent their place of residence. It protects against similar loses as homeowners and can provide liability protection as well. While the majority of renters do not have apartment insurance, it is highly recommended since the costs are generally very affordable.
What Does Renters Insurance Cover?
As previously mentioned, renters insurance covers many of the same losses as homeowners insurance. It provides simple replacement coverage for small losses, as well as catastrophic losses. Apartment insurance allows a renter to get back on their feet when it may be difficult to do so on their own.
Some of the main coverages include:
Theft – When your home is burglarized or robbed, renters insurance will cover the lost or damaged items up to the policy amount. This includes when someone forcefully enters your home or takes something of yours without your knowledge or consent. Once the deductible is met, the insurance company will pay for the damage based on the replacement value of the items. A TV may have been purchased for $2000 three years ago, but to replace with a like model may only cost $800 today and that is what the insurance company will pay for.
Fire – This includes fire and smoke damage to your household goods. You or someone else could start the fire, but either way your goods will be covered. Similar to theft, once the deductible is met the insurance company will cover up to the policy amount. If it is deemed to be more, the insurance company will likely cut a check for the total policy coverage minus the deductible.
Liability – Possibly the most overlooked coverage provided by a renter’s policy, liability coverage provides protection for an individual or family if they are sued by another entity. For example, if a person were to cause a fire in a home or building they rent, their landlord may be able to sue them for damages. In this case, the liability coverage of a renter’s policy would cover up to the policy limit in legal fees and damages. Another situation where the liability portion would protect the policyholder is if someone were to be injured while on the insured’s property. The policy would cover the legal costs and any awarded damages up to the policy limit.
Loss of Use – Another feature of a renter insurance policy that is commonly overlooked is the loss of use benefit. Loss of use covers the living expenses, up to the policy limit, for the insured in the event they must vacate their living premises. It can cover hotel rentals, dining out and transportation if all of the additional costs are due to being forced out of their home.
How Much is Renters Insurance?
Renters insurance can vary in price depending on a lot of different factors, but is typically a fraction of what a homeowner’s policy would cost for similar coverage. The main reason is because a renter policy does not cover the actual structure itself, only the contents within the structure. A homeowner policy covers the building as well as the contents.
Typical factors that will affect the price of the policy include:
Coverage Limit – Usually the biggest determining factor of price, the coverage limits can vary wildly from policy to policy and should be considered carefully when selecting coverage to go with. The coverage limits include the amount of personal property, the total liability amount as well as the amount desired for loss of use reimbursement.
Location of Property – Certain locations have higher rates of crime and disasters, therefore renters insurance policy premiums reflect these differences. A residence in the inner city where crime rate is higher will typically be more expensive than a comparable unit in a lower crime neighborhood.
Building Type and Protection Installed – The type of building, building material and protection equipment installed in the residence will play a factor in the price of the policy. A home with deadbolts or an alarm system is more difficult to burglarize; therefore the premium may be lower. Buildings with built in fire alarm systems that contact the fire department automatically make the building less likely to burn down. This can greatly reduce a policy premium.
Previous Claims – Individual and family insurance claim history can also play a part in the pricing of an insurance policy. A family that has had no or only minor claims will usually pay less for the same coverage than a family that has frequent or high claims from the past.
How to get Renters Insurance Quotes
There are a number of different companies that can provide you with renter’s insurance quotes. One of the most common ways is through a direct agent that represents one insurance company or through a broker who has deals with multiple agencies. There are also online brokers that allow for multiple quotes without having to speak with an agent directly.
Understanding a Renters Insurance Rate
Once you have received one or more quotes, it is important that you understand the renters insurance rate attached to each. The best way to compare is request the same coverage from each provider, that way you can look at each quote in an apples-to-apples scenario. If one provider offers more liability coverage but costs a little more, it is difficult to see which is a better deal.
Something to watch out for as well is when agents will do a comparison for you. Very few times will an agent give you a quote comparison that shows a competitor giving you a better deal. They are trained to spin the numbers in a way that shows their quote is better. A common way to do this is by adjusting the numbers so they are not apples-to-apples and then comparing an overall “liability coverage per dollar” figure. They can accomplish this by raising your liability coverage from $100k to $300k (which usually only costs a few dollars) and then comparing the cost per dollar coverage to the competitors $100k quote. The reality is if you raised both quotes to $300k, the cost per dollar would be comparable.