Renters Insurance, What Is Appropriate
Most companies will use the tenant homeowners form known as the HO4 policy. This policy covers your stuff for the most common causes of loss, pays your additional living expenses if you are forced to live in a motel and eat restaurant food after covered loss, and pays the medical expenses to people injured on your premises because of your negligence.
Your stuff: You choose the amount of contents coverage you need.
How much is that? – Just add up the cost of acquiring the major furniture in your apartment, or if you are a student first venturing into the world, the stuff you own. It’s probably worth more than you think.
Coverage under the standard homeowners tenants form is for actual cash value – replacement cost less depreciation. For example: your fivw year old refrigerator may be worth only a few dollars, but will cost hundreds to replace. Most companies will cover your stuff on a replacement cost basis if you purchase a separate endorsement that usually runs 15 – 35% of the base tenants policy premium. Make sure your limit of insurance is adequate to cover your “stuff” at replacement cost.
Note! If you do purchase the replacement cost endorsement, make sure you have purchased a high enough limit of insurance to cover you in the event of a loss. See (53) COMING SOON! How much are your possessions worth, for a short worksheet to help you determine the value of your stuff.
If you pay to add walls, or make other improvements to the property that you can’t take with you, you have coverage, but your limit of insurance is limited to 10% of your contents coverage.
Additional living expenses is usually covered for an additional 20% of your contents. If your contents coverage is $15,000, then additional living expenses will be $3,000. How much will it cost to live in temporary housing until either your apartment is repaired or you find substitute housing? (Does your lease require you to pay rent even if the property is made uninhabitable after a fire? For how long after that fire must you pay?)
Endorsements: There are literally hundreds of endorsements companies make available to provide additional coverage not found in the standard tenants policy. This is when you need a good agent who specializes in personal lines insurance. Let the agent ask you a lot of questions. The agent needs answers to build the right policy for you. Tenants policies are not cookie-cutter forms. Every family’s needs differ and a good agent can help you design the correct plan for you.
Theft limitations: This brief article is not the forum to discuss every limitation and exclusion under the Homeowners form. However, you need to know that certain “target” items have limited coverage for theft. The limit shown is the average theft limit in the market. Your company may provide less or more. Increase coverage by endorsement to the policy or through a personal article floater policy. (See 15 for information on insuring jewelry, furs and other high valued items.)
- Jewelry and gems ($1,000)
- Furs ($1,000)
- Gold, silverware, pewterware ($2,500)
- Guns ($2,000)
- Building supplies – no coverage for theft
Other Property limitations. The following property is subject to certain maximum limits of coverage. The limit shown is the average limit of insurance available in the market. Your company may provide less or more. Increase coverage for most by endorsement to the policy.
- Electronics used in an auto ($1,000)
- Money ($200) Including coin collections – face value only.
- Stamps ($1,000)
- Business personal property ($2,500 on; $250 off premises)
- Other than boat trailers ($1,000)
- Boat trailers ($1,000)
- Boats – anything bigger or more valuable than a canoe – purchase a separate boat or yacht policy.
- Credit card forgery ($500)
- Fire department service charge ($500)
- Fine arts, antiques, Persian rugs, hummels and other collections should be appraised and listed separately in a personal articles floater or endorsement.
Liability coverages are usually identical from form to form, however some companies will have special endorsements to improve coverage. We recommend that you always ask your agent to quote you an umbrella liability policy (improves coverage and increases liability insurance limits to $1,000,000 or more).
Liability covers you for your negligence in injuring other people or property on your premises or through the actions of many of your hobbies.
The policy also provides defense coverage, including hiring and paying for a lawyer (if necessary) and paying most court costs.
Covered claims include: slips and falls; baseball beans the neighbors child; you hit the foursome in front with your errant hook shot; your child leaves a skateboard on the stairwell and an elderly neighbor slips and falls, breaking a hip in the process. Homeowners insurance does not, however, provide you any car insurance for any car you drive. High limits of insurance are recommended, and again, you should ask your agent about an umbrella policy to increase your coverage to $1,000,000 or more.
Why high limits of liability insurance? Anyone can sue for anything and for any amount.
If your policy covers you for $100,000 liability insurance and you are sued for $200,000, your insurance company will advise you that you need to hire a lawyer at your own expense.
If the insurance company pays out the $100,000, its obligation is done, but the lawsuit may not be over. Courts are backed up. The high cost, whether good or bad, of lawsuits, court fees and lawyers is not exaggerated.
The injured party may not have to pay a dime in attorney’s fees until the lawsuit is won. You don’t have that option. Your defense lawyer will want to be paid from the day of hire, often for each hour worked – even if you eventually lose the case.
Medical payments coverage is for minor injuries to people other than residents of the household. You don’t have to be sued or be negligent.
Example: Aunt Bertha from 200 miles away comes to visit for a few days. The day she arrives she slips on the stairs and breaks a hip. The insurance company will pay up to the medical payments limit ($1,000 – $10,000 normally) for the medical expenses incurred. After the medical payments limit is used up, you must be negligent and/or sued by the injured person.
Private passenger vehicles
Owning a home has no bearing on the auto policy. There may be more discounts if you buy a both a home and auto policy from the same company, but the coverage is no different whether you own or rent.
However, there are many companies who may not insure vehicles that are street parked (vs. off-street or garage parked). Garaged or off-street parked vehicles are less likely to be stolen, vandalized or run into by vehicles. Given a choice, you might look at housing where there is off street or garage parking. It’s a fact. If your car gets damaged, you either have to ride around with the dents, or pay the deductible and let the company fix it. If you make too many claims, not only might the company cancel you, but you will go broke paying out-of-pocket deductibles.
Lock your car. Please.
Deductibles save money. Combine your auto and home insurance with the same company. Many companies offer discounts on both auto and home when you insure them together (not available in all states). Some companies offer combination auto/home policies which usually provide superior coverage at a lower price than if you were to cobble all the coverages together using many policies (not available in all states).
Boats, RV’s and Off-Road Vehicles
Like vehicles, there is no coverage difference whether you rent or own a home.
You have the same problem with storage of your out-of-water boats, RV’s and off-road vehicles that applies to private passenger vehicles. If your boat goes from the marina to the water each season, there is no difference where you live. Companies are going to ask where the boats or vehicles will be stored when they are not in use. (See (7) Boats, RV’s, Snowmobiles and other outdoor hobbies – do you have the right coverage for more information on insuring this equipment.)
Life and Health Insurance
There are no special requirements or limitations for tenants