What Kind of Renters Insurance Policy to Buy
Did you buy the wrong renter's insurance policy?
Recently a client decided to take our advice and required all tenants to carry a renters insurance policy with a minimum of $100,000 of liability insurance.
As a landlord, he was potentially in a situation where his insurance may be forced to pay for a tenant’s liability, claims, if someone was injured on the property.
Besides, it’s a good idea to have a policy to protect your personal belongings regardless as a renter.
How much renters insurance should you have?
Renters insurance policies offer coverage limits of at least $10,000 and can be increased from there with premiums ranging from $80 to $300 annually depending on your zip code, any prior claims and the amount of coverage you need.
Buying Renters insurance Do’s and Don’ts
So, getting back to the required policy, making sure you’re getting the right amount of coverage for the best premium.
Several of his tenants contacted me about getting a quote and making sure the landlord was properly added to the policy per his new rental agreement.
Several weeks went by and closer to the deadline for all tenants to comply when we were having a conversation with the client about one tenant.
He told me the story about how one of the renters got a cheap renters insurance policy from AAA for $60 a year. I said wow, that’s a pretty good rate and I don’t recall ever seeing a renters insurance policy that cheap.
I asked the client if he could email over a copy to verify the correct additional insured verbiage was added and then I’d check the coverage’s or in this case the lack of coverage.
Well, let me see where to start; first of the policy was an ACV policy which stands for “Actual Cash Value” which basically means garage sale, flea market price coverage.
Ten cents on the dollar if you’re lucky, image a TV bought 3-4 years ago for let’s say $1,000, you might get a $50 today. Picture yourself at a garage sale a your looking at a used TV, what do you think you’d pay the owner? That’s what you’d get with an ACV policy, Five to ten cents on the dollar.
The next thing we noticed on the policy was the deductible - $1,000.
Ouch, that’s a lot of money before the insurance company would even write a check.
Let’s say the roof started to leak and ruined your laptop computer; the landlord is not going to be responsible – remember he’s requiring you to buy a policy which not only provides liability protection but personal property coverage for your belongings. If you have a large deductible and a small claim (less than the value of your personal property) the insurance company will not pay anything, because you haven't met the deductible amount first.
Real Life, Renters Insurance Story
Quick story, we had a young customer 15+ years ago call about renters insurance and never bought the policy.
A few months later her dad called me and asked about the renters policy.
We explained we gave her a quote and made a few follow up calls, but she never bought it, why?
Well, it turns out there was an electrical surge in the building and she lost everything plugged in: TV, Computer, Appliances, you named it was zapped dead. No coverage and no sympathy from the apartment complex who at the time, even offered a $100 credit towards a renters insurance policy.
Taking a high renters insurance deductible may mean you get nothing
So, why do I mention the $1,000 deductible as a potential problem for the renter? Let’s do some quick math and assume if you add up everything a person might own, including clothes, furniture, computer and TV totals $10,000.
Remember, if you bought a renters insurance policy with ACV coverage and there’s a total loss like a fire and have this policy the insurance adjuster comes out to total everything up and agrees with the $10k figure.
Okay, now the pain sets in - $10,000 worth of stuff is now valued at ten cents on the dollar or $1,000 (-) minus your $1,000 deductible = $0.00 check to you.
That $60 policy is not looking like a great deal anymore. Sure, if you have a grease fire on the kitchen stove and cause damage to the property you'll have at least $100,000 worth of liability insurance, but is your personal property covered...?
Not if you bought an ACV renters policy like above.
What kind of apartment renters insurance policy should you buy?
Renters insurance basics
A full replacement policy with a reasonable deductible is what you need.
Why short change yourself and think you’re getting this great deal when you’re holding an empty bag.
Get a policy that will replace all your stuff with full replacement value.
Second, get a reasonable deductible of $250 or $500 and based on policies we sell everyday I’d recommend a $250 deductible.
We quoted a client on Friday, $150 annually with a $250 deductible and $136 for a $500 deductible. A $14 dollar difference in cost and two hundred and fifty dollar less you would receive if there was a claim.
Renters insurance is just common sense and most insurance companies will give a big discount on your auto insurance policy with the multiple policy discounts.
Read our article on buying 2 insurance policies for the price of one.
Many of our clients save enough money on their auto insurance to completely cover the cost of the renters insurance policy when you combine the two.
Find a trusted insurance agent or broker to go over the coverage’s and make sure you are fully protected against any loss claims.
Lastly, all renters policies we've ever sold come with a minimum of $100,000 and can generally be increased to $500,000 which not only is protection for your landlord but you.
If you have a fire in your rental unit or the toilets overflow and ruin your unit and potential other units... You are responsible and could face garnishment against future income for repairs, if found responsible.
What Renters Insurance Covers
Renters insurance policies provide coverage for three things.
1. Your personal belongings, including clothes, furniture, small appliance, electronic and a small amount of jewelry. If you have hobbies or collections of valuable items you will want to get a rider or schedule those items separately as they will not be covered under a normal policy.
2. Liability coverage if there is accidental damage to the property out of your control, and with claims from guests or visitors hurt while in your rental unit.
3. Additional living expenses. If you are faced with being displaced because of fire, tornado, falling objects or other covered perils, your renters insurance will pay your living expenses until the property is livable again or up to the limits of coverage.
Please leave comments about your experience renting and any losses you may have had. I’ll respond to all inquiries online or you can call us at Insurance Brokers Group 800-459-6060 for more renters insurance information.