Earlier this year, I wrote about renter’s insurance and why I felt it was important for renter’s to buy a policy and protect themselves and their assets against various risks.
I’ve received a lot of feedback on that article and decided a follow-up would be helpful. I turned to Ed Charlebois, Vice President or Personal Insurance at Travelers, and asked him why renters don’t seem to purchase rental insurance policies more frequently.
Charlebois said there are several common misperceptions about rental property that are generally confusing to renters.
“Renters think their landlord is responsible for their belongings if there was a fire or other damage to the building. In most circumstances, the landlord’s property insurance is not going to protect the tenant,” he explained. “And, renters think that they don’t have that much to insure. But think about replacing every stitch of clothing, all of your furniture, books, electronic equipment and you’ll quickly realize that renters insurance is an important investment.”
Charlebois said it is important that renters understand the value insurance can bring to their long-term finances should something go wrong.
“We’re always trying to educate consumers on ways insurance can help protect [a renter’s] finances and once renters understand the amount of coverage they can get for the price, it makes sense,” he added.
Charlebois said that renters don’t often think about the reasons they might file a claim. The top five reasons renters file claims on their renter’s insurance policy include (in order of popularity) “on premise” theft, “off premise” theft (including things like personal items stolen from a car or hotel room), water damage, wind damage and fire damage.
Renters insurance also typically includes a liability clause, which protects you from the financial expense of repairing damage to others’ property, losses due to events like cooking fire or water damage claims from plumbing fixtures overflowing (like sinks or bathtubs), accidental personal injury to others (physical, like a slip and fall, not libel or slander), and dog bites.
According to Charlebois, renter’s insurance policies typically include these five coverages:
- Credit Card & Check Forgery – provides coverage for losses from credit card and check forgery;
- Additional Living Expenses – includes coverage for reasonable necessary additional living expenses (hotel, meals, laundry, etc.) if damage to the building prevents a renter from living in the unit;
- Personal Liability Protection – provides financial protection against liability claims and lawsuits brought by others for accidental bodily injury or property damage;
- Fire Legal Liability – protects the renter if they are held legally responsible for accidentally caused fire damage to the building in which they live; and
- Improvements – applies a percentage of the contents coverage to repair or replace improvements made by the renter to the rental unit that has been damaged.
The premiums might be as low as $125, but Charlebois says that the average premium is in the $200 range. But talk to your insurance agent for specific details of coverage and cost, and be sure to shop around.
Another question renters ask is if insurance companies are pulling credit histories and scores to price insurance.
Charlebois said that where it is permitted by state law, Travelers is using a credit-based insurance score to price insurance policies.
“Research has shown that consumers with better insurance scores generally file fewer claims and have lower loss severity. In fact, over 90 percent of insurance companies use insurance scores, according to a study by Conning Research and Consulting Inc., a Hartford, Conn.-based research firm,” he added.
When it comes to buying renters insurance, you have to ask yourself if you have enough cash to replace every item you own if it was all destroyed, or to cover an unforeseen situation where you’re being held liable.
Most of us don’t have ready access to that kind of cash, which is why you should consider insurance for renters (and homeowners) as a part of your financial plan.
“It can be the safety net that can keep someone afloat in an unexpected, unfortunate situation,” Charlebois said.
Check out an insurance agent’s point of view on the Equifax Personal Finance Blog. I write the real estate blogs for the site, but we have experts covering tax, retirement, credit and insurance. This week Equifax Personal Finance Blogger Linda Rey wrote about renters insurance policies and what they entail. Read here: why you should be talking to your insurance agent about renter’s insurance today.