Renter's Insurance Protects Your Assets

By Ellen Chang

NEW YORK ( MainStreet)--Protecting your valuables and assets by purchasing renter's insurance could be a worthwhile investment and a way to minimize your risk financially.

Even apartment dwellers who have not amassed a large amount of furniture or expensive belongings should ensure they are protected against theft, accidents or other liabilities.

If the list of your current inventory of valuables is short and mostly limited to electronics such as your laptop, smart phone and TV or clothing, renter's insurance will protect you from any losses.

Purchasing renter's insurance protects your belongings, because your landlord's insurance only covers the structure and liability exposure, said Bob Ketchum, East region product vice president for American Modern Insurance Group, based in Cincinnati.

Not purchasing renter's insurance can you leave you exposed to a potential financial loss or setback, he said.

Renter's insurance covers the tenant's personal belongings and provides personal liability protection in case a guest is injured while in the home or property is damaged outside the home, Ketchum said.

Some companies such as American Modern offer policies which includes coverage for things such as debris removal, reasonable repairs, fire department surcharge and broken glass.

Only 34% of Americans who rent their homes or apartments have renter's insurance, according to a March survey released by InsuranceQuotes.com, a Bankrate company.

"Renter's insurance is often overlooked by younger and older people," said Laura Adams, senior insurance analyst at InsuranceQuotes.com. "It's unfortunate, because it's a really inexpensive financial safety net. You need to be prepared for a worse case scenario."

Some policies even provide coverage for when you are traveling and your laptop or other items are stolen, she said. Or it can protect your valuables that are housed in a storage unit.

"It's as if the theft occurred at your home," she said. "This is optional coverage for some policies."

But What's The Price?

Paying for renter's insurance is fairly inexpensive, and the average monthly cost is $18 a month or $0.58 per day, said Ketchum.

Some policies start as low as $180 per year, and the deductibles vary from $100 to $250 or even as high as $500. Setting your deductible at a higher amount will lower your payment.

Making a list of your belongings will help you determine how much it will cost to replace them in case of an emergency, theft or accident. If you have valuable jewelry or family heirlooms, you may need to buy special riders that are separate from the policy, said Adams.

Renter's insurance will protect you against water damage such as a dishwasher leak from an apartment above yours, vandalism or from power surges or earthquakes, depending on your state and coverage, said Stephen Ebbett, president of ProtectYourBubble, the UK-based insurance company.

When you are comparing quotes, ask the provider about what the policy does not cover, if claims settled on actual cash value or replacement cost and the amount of the deductible.

The coverage of your personal belongings can start with a $10,000 limit. As you buy more furniture or other household items, you can increase your coverage. Most policies have personal liability limits of $100,000.

Purchasing insurance for a set amount such as $30,000 can alleviate any financial hardships compared to buying a policy that ensures you only for the current market value of your contents, which are likely to have depreciated by a large percentage.

"Renters who are dealing with property theft or a mishap that damages their living space have enough to worry about without having to empty their bank accounts or max out their credit cards to replace their possessions," said Ebbett. "Imagine losing all your possessions - clothes, electronics, appliances and everything else - and having to start from scratch using the money in your bank account."

Some property owners now require their tenants to purchase rental insurance before they can rent an apartment, condo or home. Renters should consider this when they are budgeting for housing expenses.

"Sometimes it is unclear who is responsible for damaged personal property such as a leak," said T.J. Rubin, owner and managing broker of Fulton Grace Realty, a Chicago-based property management, apartment leasing and residential brokerage firm. "We make it clear to tenants that they are responsible for personal property. It gives the renter a huge peace of mind."

Having renter's insurance is especially important if you have roommates. Either get a joint policy or make sure all your roommates have an individual policy, said Rubin.

If your apartment or home is damaged by a fire and you are forced to move out while they are making repairs or rebuilding, renter's insurance will cover alternative housing such as living in a hotel and paying for meals, said Greg Isaacs, president of CoverHound, a San Francisco-based company which allows consumers to compare rates from insurance carriers and purchase a policy online.

Landlords are not required to provide you with housing if the dwelling is unlivable.

"This is important coverage for the responsible adult to have," he said. "The number of incidents that may cause someone to need a renter's insurance policy are literally countless from fire and theft to water damage or trip and fall. Just because somebody is a renter does not mean they should not be protected."

Another benefit to purchasing renter's insurance is that many companies will discount your auto insurance policy if you also purchase renter's coverage, said Issacs.

"Sometimes the discount can be as much as the renter's policy itself, making the renters coverage virtually free," he said.

--Written by Ellen Chang for MainStreet