2torial #0641:
Learn2 Buy Renter's Insurance

Home is where the insurance policy is

If a fire, burglary, or other dire event happens at your condo or rented abode, your landlord or building association's insurance policy could leave you out in the cold. That policy usually covers the structure and public areas of the building, but excludes its contents--that is, your stuff.

Fortunately, renters and condo owners can buy a version of home owner's insurance called renter's or tenant's insurance. It covers the contents of your home against damage and theft and limits your liability if a visitor gets hurt on the premises--and it's usually quite affordable. With a little research and a modest cash outlay, you can protect yourself against financial catastrophe.

In addition to the inventory of possessions described in Step 2, you'll need to be armed with some information before you go shopping for insurance. Research the following:

• Year your building was built and number of units in it

• Last time the plumbing and wiring were updated

• Whether you have a fuse box or a circuit breaker

• Presence of deadbolts and security systems

• Presence of smoke detectors and fire extinguishers

Understand the options

Renter's insurance has two sorts of coverage (property and liability), two levels of coverage (cash value or replacement), and two general categories of policy (basic and comprehensive). These are some of the perils commonly covered:

• Fire, explosion, or lightning (including smoke and fire-related water damage)

• Windstorm or hail (may be excluded or require extra coverage in hurricane areas)

• Theft or vandalism

• Volcanic eruption (but not earthquake damage, which is either excluded or requires a different policy or additional coverage on your basic policy)

• Water-related damage from your plumbing (floods caused by nature require additional coverage if you live in a flood plain)

• Electrical surges

Property and liability coverage. Most policies typically cover both these areas of harm, including damage to or loss of your belongings (or others' property on your premises) by disaster or theft, as well as medical and legal expenses arising if someone gets injured in your home. They usually also help with your living expenses if your home suddenly becomes unlivable.

Your policy may exclude damages in any of the previously listed categories due to negligence (for instance, if you left the bathwater on, causing a flood). Ask the agent about any exclusions before you decide on a policy.

If you own a condo, read the condo association's insurance policy to find out what parts of your unit's interior are covered. For instance, are your floors, finished walls, and improvements insured? Seek a renter's policy that will cover what the other policy doesn't.

Cash value vs. replacement value. Cash value coverage pays the depreciated value of your property, or what you could get if you sold it. Replacement value pays what it would cost to replace an item. Though cash value coverage has slightly cheaper premiums, it's not worth it if you ever have to make a claim. Make sure you get replacement value coverage.

Basic vs. comprehensive policies. Basic or standard policies cover your property against named perils (like those in the previous list). This means if it's not specifically mentioned in the policy, it's not covered. Comprehensive policies, which are more expensive, cover everything that's not explicitly excluded on the policy (typical exclusions include earthquake, flood, and hurricane damage in likely areas).

Determine your level of coverage

Make a list of all your belongings, including information about what they're worth.

Make an inventory. Go through each room and space in your place, writing down everything you see. It's tedious, but it'll help you remember everything. Count your books and CDs, and remember rugs and curtains and the contents of drawers and closets.

Next to each item, write when you bought it and how much it cost. If you have receipts for items on your list, keep them or copies of them with your list. If you don't have records, estimate what it would cost you to replace an item.

Get appraisals. If you have furs, jewelry, antiques, coin or stamp collections, or other precious goods, you'll probably need to "schedule" them so you can insure them for their full worth. This means you'll need to get them professionally appraised, then itemized in a separate document or "rider" attached to your main policy.

If you own a condominium, you may need to have your interior fixtures, installations, and improvements appraised. The insurance company will do it for you, but see 2torial #0790: Shop for Home Owner's Insurance for information about finding your own appraiser.

Take pictures. Capture each room and each prized item on film or video. This documentation will provide good evidence of the value of your possessions if you ever need to make a claim.

Arrive at a dollar amount. When you're done with your inventory and appraisals, total up the separate values of your possessions. This total is your replacement value, and represents the amount of property coverage you should buy.

Choosing an appropriate amount of liability coverage is more arbitrary. Remember, this is the part of your policy that covers your visitors' accidents and any medical and legal costs that arise from them. Agents typically recommend liability coverage of $100,000 (U.S.), but you may wish to buy more or less depending on the number of visitors you tend to have and your degree of comfort with this sort of risk.

Note: If you have a home business, you'll probably have to buy a separate policy that covers your home office equipment, inventory, and other business-related property and liability.

Shop for a company and agent

Once you know what you want, look for a company and agent you feel you can work with over the long term. If you already have auto or other insurance with a company you like, find out if it offers renter's insurance (you may also get a price break this way).

To find other possible insurers:

• Ask your friends and associates to recommend companies or specific agents.

• Call your state or provincial department of insurance and ask which companies in your area offer renter's insurance (find this government office in your telephone book's government pages).

• Search for insurers in your phone book or online (type "renter's"--or "tenant's"--"insurance" and the name of your city, province, or state into an Internet search engine).

Judge possible insurers according to the following:

Reliability. Insurance rating services grade insurance companies according to their financial soundness, from AAA (the best) to F. Don't consider companies that don't have high ratings.

Reputation. Check with your local department of insurance to see if a company has a history of customer complaints. The company itself may be able to provide you with articles, customer surveys, or other documents relating to its customer service record.

Talk to friends or associates who use the company, too. Their experiences, good and bad, can be telling. Call each potential insurer's customer service and sales lines, as well. If you encounter long hold time, unprofessional workers, and difficulty getting information when you're shopping, chances are you'll suffer the same when trying to file a claim.

Get the best price

There are several ways you can reduce the price of your premiums.

Shop around. Naturally, once you've found several insurers with good reputations for customer service and financial reliability, you should look at their prices on comparable policies.

Install protective devices. A house or apartment with measures of protection against fire and theft will cost less to insure than the same dwelling without. Insurance companies may also give you a break if you attach electronic identification devices to your computer, television, and other valuables. Ask your agent about these devices.

Find out about group coverage. As previously mentioned, you may be able to combine your renter's policy with another policy (like auto) or, if you're a student, seek coverage under your parents' policy. You may also be eligible for a break if you belong to a professional or alumni association. Ask potential insurers.

Ask about age-related breaks. Many insurers offer discounts to those who are over age 50 and/or retired.

Choose a higher deductible. The deductible is the amount you'll have to pay toward insured damages before the insurance company starts paying on a claim. If it's high (say, $1,000 U.S.), you'll pay the first $1,000 against any covered damage. Because you're sharing so much of the risk, your premiums will be lower.

You're the best judge of how much risk you want to take on yourself and how much you want to pay the insurer to bear. In any event, buying renter's insurance is a wise financial decision, and it should afford you some priceless peace of mind, too.

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