Renter Insurance
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Why should I buy renters insurance?
What are the limits on a standard renters policy?
How does a renters policy protect my personal property?
What is the difference between "actual cash value" and "replacement cost" coverage?
Do renters policies cover personal property such as jewelry, furs, firearms, or silverware?
What is personal liability coverage and why do I need it?
Why do some apartment complexes require tenants to have renters insurance?
What if I share my apartment with a roommate? Do we both need to have renters insurance?
Which types of extra coverage should I consider adding to my renters policy?
How does an insurance company determine my renters insurance premium?

Why should I buy renters insurance?

If you live in an apartment or a rented house, renters insurance covers both you and your possessions. A standard renters policy protects your personal property in many cases of theft or damage, and may pay for temporary living expenses if your rental is damaged so seriously you can't live in it. It can also protect you from personal liability.

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What are the limits on a standard renters policy?

[Note: this answer is based on the Insurance Services Office's HO-4 policy.] A renters policy usually contains four separate sections, referred to as Coverage C, D, E, and F.

• Coverage C protects your personal property, such as furniture, CDs, appliances and clothes. You choose a dollar amount limit for this coverage (what you think your possessions are worth) when you purchase the policy.
• Coverage D covers loss of use - that is, the expenses you face when your apartment can't be used because of an insured loss. The limit is usually 20% of your personal property limit.
• Coverage E covers your personal liability claims and suits for bodily injury or property damage. You choose this limit when you buy the policy.
• Coverage F pays for medical expenses for minor injuries to others even if you were not at fault. The policy normally includes limits of $1000 per person.

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How does a renters policy protect my personal property?

A renters policy covers "named perils." This means your property is protected from the perils specifically listed on your policy. These usually include:

• Fire or lightning
• Windstorm or hail
• Explosions
• Riots
• Aircraft
• Vehicles
• Smoke
• Vandalism or malicious mischief
• Theft
• Falling objects
• Weight of ice, snow, or sleet
• Accidental discharge or overflow of water or steam
• Sudden and accidental tearing apart, cracking, burning, or bulging
• Freezing
• Sudden and accidental damage from artificially generated electrical current
• Volcanic eruptions (but this doesn't include earthquake or tremors)

Renters coverage applies to your personal property no matter where you are in the world. You're covered when you are on vacation as well as at home.

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What is the difference between "actual cash value" and "replacement cost" coverage?

These are two ways of calculating how much the insurance company will pay if you report a loss. Standard renters policies cover personal property on an actual cash value basis. This means payments are based on the replacement cost of the property minus a deduction for physical depreciation and obsolescence. If you choose to add replacement cost coverage (for an additional premium), the insurance company will pay one of the two amounts listed below, whichever is less:

a. the cost to replace the property with a similar type and quality of property without a deduction for depreciation, or

b. the full cost to repair at the time of the loss.

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Do renters policies cover personal property such as jewelry, furs, firearms, or silverware?

A standard renters policy covers limited "named perils" (see How does a renters policy protect my personal property?) for certain types of personal property. For example, the policy limit is $200 for loss of money, $1000 for loss of securities, and $1000 total for theft of jewelry, watches, and furs. Other types of property with limited coverage amounts include: firearms, watercraft and their trailers, other trailers, silverware, business personal property on the residence premises, and business personal property away from the residence premises.

If you own any of these types of items, you can buy a scheduled personal property endorsement. (Endorsements are optional agreements which alter the provisions of your main renters policy.) This allows you to buy more coverage for your valuable possessions. Each item is specifically described and has a separate limit of insurance. An additional benefit of this endorsement is that it provides coverage for this property on an "all risk" or "open perils" basis. This means these listed items are protected from anything that goes wrong (unless the endorsement specifically prohibits them).

The cost of a personal property endorsement depends on the type of property and the amount of coverage you purchase for each item.

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What is personal liability coverage and why do I need it?

A standard renters policy provides personal liability coverage, which applies anywhere in the world. This protects you and your family in case someone brings a claim against you or sues you, alleging that you caused them either bodily injury or property damage.

Personal liability coverage covers claims for bodily injury or property damage caused by the insured person as long as it isn't vehicle-related and does not arise from business activities. In addition to the limit of liability, your insurer must pay all legal defense costs if an insured is sued for something that is covered under the policy.

Also, the insurance company will pay up to $500 per occurrence for damage to property of others caused by the insured. For example, if you go to a party at someone's home and cause some damage, this will pay to replace the property whether or not you were negligent.

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Why do some apartment complexes require tenants to have renters insurance?

Owners carry property insurance to protect themselves in the event the apartments are damaged. However, if a negligent tenant causes damage, the owner's insurer will sue the tenant for the amount of damage caused. So being covered is a good idea.

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What if I share my apartment with a roommate? Do we both need to have renters insurance?

Standard renters policies cover only you and relatives who live with you. If your roommate is not a relative, each of you will need your own renters policy to cover your own property and to provide liability coverage for your own actions.

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Which types of extra coverage should I consider adding to my renters policy?

Endorsements are optional agreements which alter your main renters policy. They can cover perils or property not covered by the standard policy. In addition to the optional coverages mentioned above (replacement cost coverage for personal property, scheduled personal property endorsement), you may want to consider the following:

• Earthquake endorsement

The standard renters policy does not cover losses due to earthquakes. If you live in an earthquake-prone region, you may want to consider this coverage. The mandatory deductible (that is, the portion of the loss that you pay) is 5 percent of your Coverage C limit

• Personal injury endorsement

Generally the personal liability portion of a renters policy includes coverage for bodily injury to others which is defined as physical injury, sickness, disease, or death. This endorsement changes the definition of bodily injury to include personal injuries. Personal injuries (such as emotional damage) can arise out of false arrest, libel, slander or defamation, or invasion of privacy. A personal injury endorsement broadens your personal liability coverage to include claims for personal injury or suits arising out of these offenses.

• Special computer endorsement

This endorsement adds open perils coverage for computers and computer equipment. Open perils coverage covers risks of direct physical damage subject to specific exclusions as compared with named perils coverage, which covers only a list of specified causes of loss.

• Business pursuits endorsement

This endorsement extends the liability coverage of the policy to certain business-related pursuits listed on the endorsement.

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How does an insurance company determine my renters insurance premium?

The following factors will affect your premium rate:

• Territory

  The geographic area where you live will influence your rate because certain regions are more subject to specific perils, such as hailstorms in some areas of Texas.

• Public fire protection class

  The degree of fire protection provided in your area is ranked on a scale of 1 (best) to 10 (worst). Areas with no fire department within 10 miles, or with a very poor water supply, may be classified as protection class 10.

• Construction

  The construction type of your building (such as frame or masonry) can affect the premium that you pay. If you live in an apartment building, the number of apartments per building is also taken into account. · Coverage amount The limits of liability or dollar amount of coverage you select will affect your premium.

• Additional coverages and endorsements

  Increasing your coverage by selecting additional, optional coverages or endorsements will increase your premium.

Here are some ways that you can reduce your renters insurance premium:

• Deductible amount

  The standard deductible for Coverage C is $250. Choosing a higher deductible (up to $2500) can reduce your premium substantially. But be aware that if you've chosen a higher premium, you may have higher out of pocket costs in the event of a loss.

• Multiple-line discount

  Many insurers will offer discounts if they provide your automobile insurance as well as your renters insurance.

• Alarm systems

  Premium credits are often available for burglar alarms, sprinkler systems, fire alarms and smoke detectors.

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