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Renter's Insurance: Don't Move In Without It
by
Charles Lamson
If you live in an apartment (or some other type of rental unit), you should be aware that although the building you live in is very likely fully insured, your furnishings and other personal belongings are not. As a renter (or even the owner of a condominium unit), you need a special type of HO policy to obtain insurance coverage on your personal possessions.
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Consider, for example, the predicament of Lois Weaver. She never got around to insuring her personal possessions in the apartment she rented in Denver. One wintry night, a water pipe ruptured, and escaping water damaged her furniture, rugs, and other belongings. When the building owner refused to pay for the loss, Ms. Weaver hauled him into court---and lost. Why did she lose her case? Simple: Unless a landlord can be proven negligent---and this one wasn't---he or she is not responsible for a tenant's property. The moral of this is very clear. Once you have accumulated personal belongings of value (from clothing and home furnishings to stereo equipment, TVs, computers, and DVD players), make sure they were adequately covered by insurance, even if you are only renting a place to live! Otherwise, you could risk losing everything you own.
Apparently many tenants do not realize this. Because surveys show most of them are without insurance---although renter's insurance is available at very reasonable rates. The policy, called Renter's Form HO-4 is a scaled down version of homeowner's insurance; it covers the contents of a house, apartment, or cooperative unit, but not the structure itself. Owners of condominium units need form need Form HO-6; it is similar but includes a minimum of $1,000 in protection for any building alterations, additions, and decorations paid for by the policyholder. Like regular homeowner's insurance, HO-4 and HO-6 policies include liability coverage and protect you at home and away. For example, if somebody is injured and sues you the policy would pay for damages up to a specified limit, generally $100,000, although some insurers go as high as $500,000.
A standard renter's insurance policy covers furniture, carpets, appliances, clothing and most other personal items, for their cash value at the time of loss. Expect to pay around $200 to $250 a year for about $15,000 in coverage, depending on where you live. For maximum protection, you can buy replacement-cost insurance, which pays the actual cost of replacing articles with comparable ones, though some policies limit the payout to four times the cash value. You will pay more for this---perhaps as little as another 10 percent---perhaps much more, depending on the insurer. Also the standard renter's policy provides limited coverage of such valuables as jewelry, furs, and silverware. Coverage varies, although some insurers pay up to $1,000 for the loss of watches, gems, and furs. and up to $2,500 for silverware. For larger amounts, you need an endorsement or a separate policy, called a PPF.
Renter's insurance pays for losses caused by fire or lightening, explosion, windstorms, hail, theft, civil commotion, aircraft, vehicles, smoke, vandalism and malicious mischief, falling objects, building collapse, and the weight of ice and snow. Certain damages caused by water, steam, electricity, appliances, and frozen pipes are covered as well. Plus, if your resident cannot be occupied because of damage from any of those perils, the insurer will pay for any increase in living expenses resulting from staying at a hotel and eating in restaurants. The liability coverage also pays for damages and legal costs arising from injuries or damage caused by you, a member of your family, or a pet, on or off your premises.
*SOURCE: PERSONAL FINANCIAL PLANNING, 10TH ED., 2005, LAWRENCE J. GITMAN, MICHAEL D. JOEHNK, PGS. 403-404*
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