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Renter's Guide: Renter's Insurance

Make Sure Your Belongings Are Covered for the Unexpected

Life is unpredictible, and so are water pipes, electrical lines and roofs. For a low annual premium, a renter can be covered for personal property loss and/or damages and personal injury liability for guests and visitors. Many leases now require tenants to provide proof of insurance coverage. Most major insurance companies offer renter's insurance. Check with your auto or life insurance company.

Parents' homeowners insurance also may provide coverage or offer favorable rates for a second policy.

Be sure to read your lease carefully. A number of landlords who rent to students include a "waiver of liability" clause in which they deny any responsibility for tenants' belongings or for injury to guests or visitors. They also may stipulate that tenants must purchase renter's insurance as a condition of occupancy. If these clauses are included in your lease and you do not purchase renter's insurance, you will be personally responsible for the costs of property damage or loss, personal injury liability, and legal expenses in connection with such events, and you may be unable to collect damages from your landlord even if he or she is partially responsible.

If your lease stipulates that you purchase renter's insurance, you must purchase it. Renter's insurance is a good idea whether you have nice furniture and lots of expensive "stuff" or are living with secondhand furniture and milk-crate tables. Most students have more to lose than they can afford to replace. In case of fire or theft, they often are surprised by the high cost of replacing a TV, computer, books, clothes, sporting goods, bicycle, jewelry and other items usually taken for granted.

Renter's insurance handles three types of problems

  • Personal property protection covers the loss of personal property due to fire, theft, water damage, smoke, etc. The value of the policy ($3,000, $5,000, $10,000, etc.) sets the limit of your compensation for damages. You determine the amount of coverage you want, and the premium or cost of the policy is set accordingly. The greater the coverage, the more you are eligible to collect and the higher the premium you will pay. With this type of coverage, if your $200 CD player is five years old, you are only able to collect the depreciated value of the machine, not the actual cost of a replacement.
  • Replacement coverage covers the actual replacement cost of damaged property. It covers the actual cost to replace damaged items, as long as the cost doesn't exceed the total policy value. Replacement coverage is more expensive than traditional property protection. If you have high-quality or expensive possessions, consider buying replacement coverage. If you don't, regular coverage probably will be adequate. With either type of coverage, having proof of ownership and the purchase prices of major items is recommended. A videotape of your apartment will help to show ownership, and either credit card or store receipts will establish the value of items.
  • Personal liability is the third type of protection provided by renter's insurance. If a guest, visitor, or service worker is injured while in or around your apartment, regardless of whose fault it is, his or her medical expenses will be covered by your policy. This is important protection in case of injury to friends or relatives who might be reluctant to sue you for damages, as well as protection for you if strangers are injured. Your insurance coverage provides payment for their documentable medical or property expenses arising out of an accident in or around your apartment. For instance, if you were at fault for leaving objects blocking the stairway, your insurance would pay damages and defend you against legal action. If a landlord were responsible for not fixing the handrail, for example, your insurance company would pay damages and then collect damages from the landlord or his insurance company. If the injured person were at fault, your insurance company would either deny his or her claim for damages or pay and then sue for recovery from the individual or that person's insurance company.

Renter's insurance costs

The cost of renter's insurance is fairly low, only $75 to $250 per year for a policy that provides reasonable coverage for the average student. A discount may be available if insurance is purchased from the same company that provides automobile insurance or your parents' homeowner's policy. Students may even be covered by their parents' homeowner's policy. Increasing or decreasing a policy's deductible value - essentially the threshold of damages for which the insurance company will pay - will raise or lower the cost of coverage. It pays to shop for renter's insurance, but most reputable insurance companies provide comparable coverage at competitive prices.