don’t have to own a five-bedroom Georgian home in the
leafy suburbs or a half-million dollar co-op in a hip urban
enclave to need insurance on the place where you live and
the things that you own. Even if you’re just renting
your first apartment out of school, you may have things you
need to protect - computers, televisions and VCRs, stereo
equipment, sports equipment and so on. These things can be
worth thousands - or tens of thousands - of dollars.
it’s surprising that less than half of all renters in
the United States bother to protect their personal belongings
and furnishings with insurance. People under 40 are particularly
advocacy groups and others - like Illinois-based
Condominium Insurance Specialists of America - estimate that
as few as one in four renters in their twenties and thirties
buy insurance. The number remains low - even though renters
insurance is relatively cheap and easy to get.
HO-4 insurance policy form - called the renters policy
in the insurance industry - is available from most property
and casualty insurance companies. Some confusion comes from
the fact that the coverage is called different things by different
companies - the contents broad form, broad theft coverage
or tenants insurance - but, whatever it’s called, the
coverage is inexpensive enough for just about any renter.
MECHANICS OF RENTERS INSURANCE
personal property is insured against loss by the broad form
perils under an HO-4 policy.
policy is purchased most often by renters of apartments, dwellings
or condominiums who do not require the complete range of coverages
- liability coverage, dwelling structure coverage, etc. -
provided by the other standard homeowners forms.
renter doesn’t usually need to insure the building in
which he or she lives. And renters who don’t want to
pay for liability protection can opt for a policy that covers
only personal property.
IMPORTANCE OF COVERAGE
will sometimes require that their tenants carry some form
of renters insurance. (This usually applies to luxury apartments
or, conversely, rent-controlled units.) In states with large
urban centers, insurance and housing regulators have outlawed
these requirements in the name of consumer protection.
these prohibitions send the message to many people that renters
insurance is a rip-off. That’s unfortunate because renters
policies can be a bargain.
In the mid-1990s, USAA - the Texas - based insurance company
that specializes in covering military and former service personnel
and their families - offered a tenant protection plan that
cost $169 a year in New York City and insured $20,000 worth
of belongings, with a $100 deductible. The policy also provided
replacement cost coverage - and $100,000 of personal liability
insurance can either be written in a comprehensive form for
all risks that aren’t explicitly excluded or for named
perils only. Named perils coverage averages about 20 percent
less expensive, because the losses it covers are more limited.
insurance written on a named perils basis should cover fire,
theft, or water damage. These are primary hazards that renters
it doesn’t cover the building itself, an HO-4 policy
does provide a limited amount of coverage for building additions
and alterations. (This coverage is also known as leasehold
improvement insurance.) In short, this means that if you spend
money to improve the apartment or house you’re renting
- and haven’t been reimbursed by your landlord - the
renters insurance will cover the investments you’ve
made in the place.
much coverage you need depends, of course, on the value of
your belongings. Once you’ve calculated the value of
the things you own, you simply have to ask yourself how much
of this you could stand to lose.
you don’t own more than a few hundred dollars of any
specific kind of personal property, you probably don’t
need renters insurance. But, if you care enough about a hobby,
activity or other experience to invest thousands of dollars
in related equipment, you probably do want to insure those
reason that renters insurance is so attractive is that it
covers personal property against theft.
comparison, basic dwelling policies do not provide any theft
coverage for personal property. A broad theft coverage endorsement
has to be added to a dwelling policy - at additional premium
- to provide such coverage.
many insurance companies, the broad theft coverage endorsement
- sold in a slightly different version as stand-alone insurance
- is renters insurance.
coverage provides insurance against loss by the following
theft, including attempted theft, and
vandalism and malicious mischief as a result of theft or attempted
caveat: The vandalism coverage won’t apply if your residence
has been vacant for more than 30 consecutive days immediately
before the loss. In most cases, though, this limit won’t
be an issue for renters.
theft policies (or endorsements) contain three definitions
that affect the coverage:
business means any trade, profession or occupation;
insured person means the named insured and residents of the
named insured’s household who are either relatives of
the named insured or under the age of 21 and in the care of
any insured person;
residence employee means an employee of any insured who performs
duties related to maintenance or use of the described location,
including household or domestic services, or similar duties
elsewhere which are not related to the business of any insured
used for business purposes isn’t considered personal
property and, therefore, isn’t covered.
property that belongs to an insured person is covered - so,
if the $2,000 camera you’re keeping for a friend gets
stolen from your trendy downtown loft, you may have some explaining
property of residence employees is covered only if you ask
the insurance company to add language saying so. This may
raise your premium - though many companies will add the coverage
for no additional cost.
limit of liability must be shown for on-premises coverage.
This limit is the most the insured will pay for any one covered
loss at the described location. On-premises coverage applies
while the property is:
at the part of the described location occupied by an insured
in other parts of the described location not occupied exclusively
by an insured person, if the property is owned or used by
an insured person or a covered residence employee;
placed for safekeeping in any bank, trust or safe deposit
company, public warehouse, or occupied dwelling not owned,
rented to or occupied by an insured person.
type of insurance limits coverage either with one general
dollar limit or a range of dollar limits applicable to different
types of personal property. In the first case, a policy would
insure all your property - regardless of type - to a limit
of $20,000. In the second, a policy would insure computer
equipment up to $5,000, stereo equipment to $2,000, sports
equipment to $1,500, etc.
limits of liability are shown for the maximum amount of insurance
for any one loss, special sub-limits of liability usually
apply to specific categories of insured property. Each limit
is the most the insurer will pay for each loss for all property
in that category.
example of the special limits of liability might be:
$200 for money, bank notes, bullion, gold and silver other
than gold ware and silverware, platinum, coins and medals;
$1,000 for securities, accounts, deeds, evidences of debt,
letters of credit, notes other than bank notes, manuscripts,
passports, tickets and stamps;
$1,000 for watercraft including their trailers, furnishings,
equipment and outboard motors;
$1,000 for trailers not used with watercraft;
$1,000 for jewelry, watches, furs, precious and semiprecious
$2,000 for firearms;
$2,500 for silverware, silver plated ware, gold ware, gold
plated ware, and pewter ware, including flatware, hollowware,
tea sets, trays, and trophies.
similar to these are found on homeowners policies. The intent
of the policies is to provide basic coverage for special items
of value which may be subject to theft losses. However, some
people collect particular items and may have disproportionate
exposures not contemplated in average insurance rates. Most
policies will not allow the full limit of liability to be
applied to a specific kind of property.
you have greater exposures, higher limits may be available
for an additional premium charge, or a separate personal property
floater may be purchased.
some cases, off-premises theft coverage is available. Off-premises
coverage applies while the property is away from the described
location if the property is either:
owned or used by an insured person, or
owned by a residence employee while in a dwelling occupied
by an insured, or while engaged in the employ of an insured.
If you ride your $2,000 mountain bike from the houseboat you’re
renting to the mountains north of Seattle - and someone steals
it while you’re waiting to pay for a café latte
- the insurance company will get you a new bike.
number of conditions apply to off-premises coverage:
you can only buy it if you’ve bought on-premises coverage,
a separate limit of liability must be shown for off-premises
coverage (this limit - usually lower than on-premises limits
- is the most the insurer will pay for any one loss),
off-premises coverage does not apply to property that you
move to a newly acquired principal residence.
last point is a considerable issue in renters insurance. One
of the ways in which insurance companies shield themselves
from the volatility that sometimes accompanies the renter’s
lifestyle is by limiting the transferability of a renters
policy from one location to another.
you move during the policy term to a new principal residence,
the limit of liability for on-premises coverage will apply
at each residence and in transit between them for a period
of 30 days after you begin to move the property. When the
moving is completed, on-premises coverage applies at the new
described location only.
theft coverage does not apply to the following types of property:
aircraft and parts, other than model or hobby aircraft;
animals, birds, or fish;
business property of an insured person or residence employee
on or away from the described location;
credit cards and fund transfer cards;
motor vehicles, other than motorized equipment which is not
subject to motor vehicle registration and which is used to
service the described location, or is designed to assist the
motor vehicle equipment and accessories, and any device for
the transmitting, recording, receiving or reproduction of
sound or pictures which is operated by power from the electrical
system of a motorized vehicle, including tapes, wires, discs,
or other media for use with such device, while in or upon
property held as a sample or for sale or delivery after sale;
property of tenants, roomers and boarders not related to an
property separately described and specifically insured by
any other insurance;
property while at any other location owned, rented to or occupied
by any insured person, except while an insured person is temporarily
property while in the custody of any laundry, cleaner, tailor,
presser or dyer except for loss by burglary or robbery;
property while in the mail.
may recognize some of these exclusions from standard homeowners
and dwelling policies. A number of these recur through all
the various forms of household insurance.
broad theft form adds two conditions that can influence whether
or not property (which would otherwise be covered) is covered:
in addition to standard duties after loss, theft coverage
requires the insured person to notify the police when a theft
the other insurance condition that applies to standard homeowners
and dwelling forms is changed slightly - if a theft loss is
covered by other insurance, the insurance company is only
obligated to pay the proportion of the loss that the limit
of liability under the theft endorsement bears to the total
amount of insurance covering the loss.
YOU’RE THE LANDLORD
course, renters aren’t the only people who may need
insurance in a rental situation. If you’re renting out
an apartment or house you own, you have significant exposures
to financial loss. However, you may find yourself in an awkward
place - lost between the limits of a standard homeowners policy
and the technical complexity of commercial landlord coverage.
you can protect yourself against some rental losses. With
some modifications, a combination of dwelling insurance and
broad theft coverage should meet your needs.
against tenant theft deserves particular attention. Even in
a case where you feel that you know the renters well, there’s
the possibility that some of your possessions might disappear
during their stay. If so, the chances are good that you won’t
collect on a basic dwelling policy - which insures the house
and contents against theft and damage from fire, wind, smoke,
vandalism, and other hazards.
it turns out that your tenants are the thieves - which does
happen sometimes - you’ll need more coverage than a
standard dwelling policy. You’ll need the same theft
coverage that the renters themselves should be buying.
can also be problems if a renter’s lack of concern about
your property leads him to forget to double-latch the door
or secure a window - making things easy for a burglar.
your insurance company learns about this, it might resist
paying for some stolen items - on the grounds that the low
premium rates for its standard coverage are based on the assumption
that you will be around to keep the home and contents safe.
At best in this situation, the company might pay for such
things as a stolen television set and furniture - but not
for missing jewelry, furs, silver, coins, and watches.
you need to look again at your homeowners or dwelling policy
before you accept a renter’s deposit check. In particular,
you need to look in the exclusions or conditions section for
a clause that reads something like:
of theft does not include any part of loss when the property
is rented by the insured to another party.
your policy has language like this, you may want to convert
to an all-risk homeowners policy or buy an endorsement broadening
your theft coverage.
we’ve noted before, you can expect to pay as much as
20 percent more than the cost of a basic policy for all-risk
coverage that provides more protection. The endorsement to
theft coverage will usually cost less than this - but still
10 to 20 percent more than a standard theft package.
you rent your home frequently, you may need an even costlier
special multi-peril policy. This kind of insurance - which
is actually a commercial policy - is designed for professional
landlords. It covers just about every exposure a landlord
faces - and can be modified to insure against various particular
risks. But, if you’re just renting one house or apartment,
you’ll probably do best to use endorsements to make
a standard homeowners or dwelling policy work.
part-time landlords may be tempted to avoid the extra insurance
and, if there’s an insurable loss, simply fail to mention
to the insurance company that the incident occurred while
the property was rented. This may work. The fact that insurance
companies don’t like to talk about it suggests it does
happen. But this kind of claim can progress quickly from white
lie to outright fraud.
most people who have enough assets to insure, it’s better
to tell the whole truth and pay a slightly higher premium.
practice of exchanging homes - you stay in another
family’s place while they stay in yours during vacations
- can present a different kind of problem when the exchange
includes use of the family car. What if someone using your
home has an accident with your vehicle? Or if you have a collision
as you drive an unfamiliar car in a foreign country?
the U.S. and Canada, your car insurance - collision and liability
- automatically remains in effect as long as the driver has
your permission to get behind the wheel. It’s not always
like that elsewhere.
may want to consider increasing your personal liability insurance
to safeguard your assets - just in case, for example, a renter
who’s unfamiliar with that low cellar doorway suffers
a concussion and decides to sue.
you’re thinking about turning your house over to guests
of any sort for more than a few days, you probably want to
expand your homeowners or dwelling policy. Typically, an all-risk
homeowners policy provides for $2 million worth of liability
insurance - you may need this if the house you’re swapping
has a swimming pool, sauna bath or other potentially dangerous
broader protection can also be useful in some unusual situations.
One insurance broker told a national business magazine about
a client whose alcoholic renters destroyed an expensive sofa
by spilling drinks and dropping cigarettes on it during their
caused by renters or people who use your house in an exchange
will usually be considered normal wear and tear - and not
be covered by a basic policy. In these cases, an all-risk
or special form policy may be worth the extra premium cost.
you may want to manage some risks when you loan your house
or join an exchange program. If possible, try to control the
kind of people who will use your place. People who have traveled
or exchanged homes before will usually be better guests than
people who are new to the process. Families with older children
will be less inclined toward dangerous situations than families
insurance when it is necessary can be a big mistake. Even
if you are not a homeowner you probably have belongings of
value (at least to you). Fortunately, there are policies available
for renters to insure protection in the case of theft and
insurance is one kind of coverage that most people agree is
a bargain for consumers.
matter what type of living arrangement you have, the price
of a household’s insurance is an important issue.
note that the precise coverage afforded is subject to the
terms, conditions, and exclusions of the policy as issued.
This explanation is intended only as a guideline. This information
is not intended to be considered investment, tax or legal
advice. It is provided, for your education only. This is not
an insurance contract. All terms and coverages are defined
solely by your policy.
more details, please call a PaulBalep representative toll-free
1-800-964-8614 to receive a free, no-obligation
quote. Like so many satisfied clients, we think you’ll
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