Renters insurance: Why it’s essential
Published: Monday, September 1, 2008 at 6:01 a.m.
Last Modified: Sunday, August 31, 2008 at 11:52 p.m.
The population of renters across the country is growing, edged up in part by a slumping housing market.
Yet as graduates and others enter the work force and set up their first apartments, renters insurance probably isn’t a burning issue. It’s often only after a robbery that a policy suddenly seems like a no-brainer.
Renters insurance typically costs less than $200 a year for around $30,000 in coverage and generally includes items stolen from your car. Perhaps more importantly, most policies from major underwriters such as Allstate Corp. and State Farm Insurance Cos. include $100,000 or more in personal liability coverage. So if someone slips and falls on your property, you’ve got some protection.
Nevertheless, convincing people they need renters insurance remains a big hurdle.
Online tools offered by insurers can help assess your belongings and determine how much coverage you need. Agents can also walk you through the process over the phone.
Taking stock of your possessions is often a wake-up call.
“People are always surprised by how much it would cost to replace everything they own,” said Jake Engle, a certified financial planner with Wealth Planning and Management in Seattle.
It’s a fact that touches on an important consideration in selecting a policy — deciding whether you want a cash value or a replacement value policy. A cash value policy will only pay out the value of the property at the time it was damaged or stolen. Engle recommends a replacement value policy, which will pay out an amount that will allow you to replace your valuables.
As a practical matter, insurers typically won’t give renters a hard time about claims within reason, Engle said.
But having a written record of your belongings is a good safety measure, particularly if you own a number of expensive items. Without that proof, agents may ask neighbors or friends to confirm that you really did own a $5,000 painting or rare vintage guitar.
A written list with photographs should do the trick. Even better: Take a room-by-room video inventory of your home, with a voiceover describing the brand and model of major belongings. You don’t need to capture every refrigerator magnet and tell the story behind every stuffed animal, but give a sense of the brands and volume of clothing you own.
You might want to note, for example, that you own five suits from Jos. A Bank, three pairs of Lucky brand jeans, and eight pairs of Italian dress shoes.
Whether it’s a written or video record, keep the record at a safe location — away from your home.
Even though awareness of renters insurance is low, there are some signs that it’s starting to grow as more families and higher income households are renting, said David Funk, director of Cornell University’s program on real estate. “They have mindsets like homeowners, and understand the need for it,” he said.
Another reason is that people of all ages now own smart phones, iPods and laptops, which can cost a bundle to replace. Such electronic gear is more likely to be stolen in an apartment complex or car parked on the street than in a home. At Allstate, theft accounts for more than 30 percent of claims on renters insurance policies, according to Jeff Moree, a company spokesman.
Finally, college students heading to a dorm, sorority or frat house should know they are still considered a resident of their parents’ homes and are automatically covered as part of their policy (assuming they have homeowners or renters insurance). But anyone opting for an off-campus apartment will need to get a separate policy, as will each roommate.
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