Renters Insurance

Even if your apartment has an orange crate for a coffee table, concrete blocks and plywood boards for a bookshelf, and the living room seating is the chair you hauled in from your mother’s basement, you still need renter’s insurance.

Your possessions, even the most dismal junk, are valuable if you must replace them. Most important, insurance protects you when your negligence causes accidents that injure other people or damage their property.

“Younger tenants don’t understand that,” said Mike McCarthy, a fire claim team manager for State Farm Insurance Cos. Renter’s insurance “covers you for negligence, and that’s where it really impacts.”

A renter’s policy, often referred to as a Tenants Form HO-4, is like a homeowner’s policy without the home. A tenant’s policy insures your household contents and personal belongings against certain perils, and like a homeowner’s policy, provides coverage for additional living expenses and personal liability protection.

The primary causes of property loss are fire and water, followed closely by theft, McCarthy said.

Fire can wipe out some or all of one’s belongings, water ruins what the fire missed, and smoke permeates everything. An apartment fire is especially damaging because it may spread destruction and smoke to other units in the building. Consequently, liability coverage protects you in lawsuits by other tenants.

McCarthy said some of the most common causes of accidental fires are:

• Burning candles left unattended. “They’re only as safe as the container they’re in,” he added. “Glass can fracture if the candle is allowed to burn too long.”
• A chimney fire, especially prevalent in winter.
• Grease or other kitchen fires.
• Children playing with matches or lighters.
• Hot light sources, such as halogen bulbs, placed too close to flammable material.
• Wiring. Electrical cord bound up in a knot can overheat. Electrical wraps to keep cords compact pose a fire hazard. Overloaded circuits and frayed extension cords also fall into this category.
• Electrical appliances can overheat; a washer drain hose can break; dryer lint can ignite, especially when the appliance is not properly vented or the vent is clogged.

McCarthy said people become complacent, leaving a pot-holder on or near a hot stove burner, for example, or placing flammable materials too near a wood-burning stove.

Some renters, especially freshfrom-the-nest, first-time apartmentdwellers, may argue that they’re living from paycheck to paycheck, that the $10, $20 or even $40 a month cost of insurance is too much and that nothing the renter owns has much value.

“People don’t realize how much of value they have,” said Bev Anderson, property casualty administrator in the Nebraska Department of Insurance. “Some companies have a minimum of $5,000 (coverage) and people think they don’t even have that much. But they should just look at the shoes, clothes, linens, towels, pantry – all the incidental things that add up.”

A homeowner usually gets insurance because the mortgage holder requires it and because losing a house would be costly.

But renters often need a nudge, McCarthy said. “It’s not unusual for half the people in an apartment complex not to have it.”

McCarthy urges apartment dwellers to look at their lease for the wording on responsibility in cases of negligence. A lease or rental agreement may include a clause alerting you to the fact that your landlord’s coverage won’t protect you if your carelessness causes damage to your rental unit or other tenants’ property, loss or damage to your belongings and injuries to you or others.

Taking an inventory will make it easier to determine how much coverage you should have and, if the need arises, to make a claim. McCarthy said there is no minimum, but agents may recommend starting around $20,000. Liability can be as little as $100,000 or boosted to $300,000, $500,000 or more.

Taking photos of your rooms will help you recall what you have in case of a loss. Ideally, these photos should be kept in a safety-deposit box or similar safe place.

When you’re ready to start scouting for renter’s insurance, “Every Tenant’s Legal Guide” suggests following these guidelines:

• Shop around. There may be a savings in insuring your property with the same company that holds your auto insurance.
• Check what’s covered. Ask about things not covered. Cash is usually not covered; jewelry, computers and table silver coverage often is limited. Bicycles are usually covered but cars, vans, boats and trucks are not. If you run a home business, you may need to purchase additional insurance to cover office equipment.
• Do you want replacement-value coverage – what it costs today to replace an item – or do you want actual cash value? Replacement cost is the amount needed to replace items without deducting for age and wear. Actual cash value is the amount it would take to repair or replace damaged items after depreciation.
• Check the amount of the deductible. The range is typically $250 to $500 for property loss claims. The higher the deductible, the lower the premium. There are no deductibles for liability claims against the policy.

The Omaha World Herald
Published Sunday, February 18, 2001
by Rhonday Stansberry