Since 2008 and 2009, owning a home is about as in style as teased hair.
As foreclosures continue and people end up selling their home for less than what it was worth, renting has become the new way to live. Not owning a home takes away the investment risk that is inherent in home ownership.
If the housing market would continue to falter, you’re not out anything.
Because of the distaste towards home ownership, renting has taken off.
Rental rates continue to rise and the amount of highly sought after apartments or homes continue to fall but according to a recent survey, 57% of renters are missing an important piece of insurance:
Let’s look at a worst case scenario.
The person in the apartment next to you loves candles and you personally don’t mind smelling the chocolate chip cookie dough candle that they burn on Thursdays so you’re not complaining. One day they fell asleep with the window open and the wind blows a piece of paper on to the candle starting a fire.
Things didn’t end well. Not only was their apartment completely destroyed but your apartment couldn’t be saved either. Everything you own was lost but you’re feeling ok because the apartment had insurance against something like this.
You’re logic is both correct and unfortunate. Your landlord has insurance to protect them if the structure they own is damaged but their insurance policy doesn’t cover your valuables.
Your stuff is your responsibility and if you’re one of the 57% who doesn’t have renter’s insurance, you have just suffered a total loss without any way to recover.
Somewhere in the stack of papers that you signed along with your lease, you would probably find something that says that it’s your responsibility to insure your property, but you either didn’t know or didn’t want to spend the money.
Renters Insurance is Cheap
This isn’t like automobile or medical insurance.
This is renters insurance and you can pay the monthly premium by cutting out a dinner for two once per month.
It’s often less than $200 per year and some insurance companies offer great rates if you bundle your insurance needs.
Guidelines for Renters Insurance
There are two types of renters insurance: Cash value and replacement cost.
Cash value reimburses you at the current value. Replacement value pays you the amount it would take the replace the items.
That sounds almost the same, doesn’t it? Make sure you understand the difference because they are different.
Cash Value Renter’s Insurance
Remember in college when you decided that you were a master chef and bought a high dollar set of pots and pans? Ten years later those pots aren’t going to have much cash value but if you have a replacement cost policy, you’ll like the number they give you much better.
Here’s another example: Say you bought a TV a few years ago. What is that TV worth today, what with how quickly technology changes so quickly? Would someone pay you what you paid if they were buying it from you?
You would sell it for a fraction fo the original cost.
This is what cash value is like — you’ll get what the insurance company thinks your stuff is worth today, after you’ve worm it out for a bit.
There’s nothing wrong with kind of policy, you just need to understand what it is.
A cash value plan is good if you don’t have a lot of stuff to replace and/or your cash-strapped as it will cost you less.
Replacement Cost Renter’s Insurance
Now with replacement cost you will get the value of what it would take to replace your TV (hence “replacement cost”). It’s possible you will get more than what you originally paid since a new TV costs more now.
This is a more comprehensive policy but realize it will cost more as well.
What to do Right After you Sign Your Policy
Just like homeowners insurance, once you get the policy, pull out your camera and take a ton of pictures. Take a picture of the label on the bottom of the high end pans, take a picture of your TV and everything else. If you want reimbursed for the pillows, take the picture.
Next, make a home inventory.
If you’re the organizational Type A personality type, make a file that has the inventory linked to your pictures.
You’ll want to keep a copy of your list and photos somewhere not in your home in the event something happens and your records were lost. A safe deposit box, your folks, or online are all places to consider.
You may get away with not having renters insurance but betting on the future is a big gamble especially since you have no idea what will happen tomorrow. Cut out a few cups of coffee and buy renters insurance.
Check out Liberty Mutual for a renter’s insurance quote.
Renter’s insurance is not just for what occurs in the apartment. My son years ago had his golf clubs stolen from his car. He was covered by his renter’s insurance. He was covered for items he was transporting i his car or away from home.
Glen Craig says
Good point! There could also be coverage for identity theft. You need to check the specific insurer for details like that. It’s something to consider when comparing prices.
Jeff Crews says
I think our camera was in overload more after moving. If you are going to have renter’s insurance, then you better protect yourself and make sure you have evidence of everything you will want covered.
Glen Craig says
It takes a little work to get pictures but really it’s a quick way to make sure you have everything covered. Otherwise the insurance company doesn’t really know what you owned.
Jeff Crews says
Totally agree. That is why our camera was on overload mode. Renter’s insurance is totally worth it.
Little House says
I’d also second what Glen said: take photos of your stuff! Even if you have a list of items, your insurance company may not believe you owned a “high end” TV versus some crap TV. I’m all about making sure my stuff is covered and can be replaced. I’ve worked hard for it!
Glen Craig says
And you have to consider this…if you think renter’s insurance is expensive (it isn’t but I understand if things are tight), then think about what it would cost if something happened in your home to damage what you own. Can you easily replace a TV or computer?
Sandy Aubrey says
Renters insurance provides the same kind of general personal property coverage and liability protection as a homeowners policy. Unless you can afford to replace all of your personal belongings in the event of a disaster, you should purchase renters insurance. Renters insurance extends beyond on-premise theft and hazards. If you are going on vacation and someone steals your luggage renters insurance will cover you. You can purchase renters insurance from several different places. But it is usually better to purchase renters insurance from the same company who insures your car, it saves you some money.