What are some of the benefits of renters insurance?
Landlords can protect themselves against a variety of hazard and liability losses by purchasing adequate types and amounts of insurance coverages. Having adequate insurance coverage is an important business decision by the landlord to help protect his rental investment.
Tenants should protect themselves in a similar manner by purchasing renters insurance to provide coverage for financial protection against loss or destruction of personal possessions and as protection against liability claims of injury to other persons or property damage.
Renters insurance covers the value of the tenant’s personal property, not the rental property.
An adequate renters insurance policy helps to reduce the financial loss from damages from a covered risk. However, insurance does not eliminate all risk nor eliminate all financial loss. In event of a claim related to personal property, the tenant will be responsible for the deductible.
Personal Possessions
Tenants purchase renters insurance to help with expenses of repairing or replacing personal belongings as a result of loss or damage from covered risks from a named peril such as fire, smoke, lightning, vandalism, theft, explosion, windstorm and certain types of water damage.
Insurance carriers who provide renters insurance policies may offer either actual cash value policies or replacement cost coverage policies for purchase. An actual cash value policy pays to replace personal belongings less a deduction for depreciation up to the policy limit. A replacement cost policy may require a higher premium but pays the actual cost of replacing personal belongings up to the policy limit. The replacement cost policy does not have a deduction for depreciation.
To determine the value of personal possessions, a tenant should make a detailed list of all belongings with a notation of the estimated value for each item. Similarly, a landlord should maintain an inventory list of appliances, furniture, and other items owned by the landlord. The inventory should be a part of the lease agreement executed by the applicant.
A standard renters policy offers limited coverage amounts for personal items such as jewelry, furs, collectibles or other valuable items. If the tenant has personal property that should be covered to a higher limit, the tenant should consider purchasing a supplement to the renters policy. This supplement, called a floater, provides additional insurance coverage for valuables and may include additional protections such as accidental loss.
Liability Protections
Renters insurance can provide the tenant with liability protection by coverage against lawsuits for bodily injury or damage to property cause by the tenant actions or failure to act. It should also cover the tenant’s family members who reside in the rental unit and the tenant’s pet(s).
The financial protections offered by liability coverage can pay for legal defense costs if the tenant is taken to court as a consequence of injury to other persons or damage to the property. Renters insurance can also help pay for damages if a tenant accidentally breaks or damages someone else’s property.
The policy limit for liability protections should be set to an amount of coverage that is sufficient to protect the tenant’s assets. Renters insurance may also help cover medical expenses of visitors if they are injured on or in the rental property. The amount of medical coverage protection will be set according to the limits of the renters insurance policy coverage.
Additional Living Expenses
If the tenant’s rental unit is destroyed by an insured disaster or damaged to the extent that the tenant cannot stay in the unit while the unit is being repaired or rebuilt, a renters insurance policy can provide help with living expenses during the tenant’s temporary relocation. The additional living expenses (ALE) coverage in a renters insurance policy can pay for hotel bills, temporary rentals, restaurant meals, and other expenses incurred as a result of a covered loss according to policy limits.