Renters insurance is one of those things that most agree is a good idea, but few people purchase.
That may not be an option anymore. Many apartment owners are starting to require it before you sign a lease with them.
A survey by the National Multifamily Housing Council showed that 44 percent of property management companies required their residents to have the insurance for all of their properties; another 40 percent required it on some of their properties.
This came up recently in my family when my son changed apartments in Austin. Not until the lease documents were sent out did the requirement become obvious. He needed to prove $100,000 in liability coverage before he could move in.
“Property owners are allowed to require renters insurance,” said Ed Blinn, spokesman for the Apartment Association of Tarrant County. “It’s becoming more and more of a trend. It’s in the best interest of the renters.”
Fortunately, renters insurance is one of the best insurance values out there and recommended by consumer advocates as a way to protect personal property.
But most renters don’t realize its low cost. The average annual premium for renters insurance is $188, or roughly $15 a month, according to a recent survey of millennials by Austin-based InsuranceQuotes, an online tool to shop for insurance.
“A big takeaway from the survey is that many consumers underestimate the benefits of renters insurance and overestimate its cost,” said Laura Adamas, senior insurance analyst for InsuranceQuotes. “Twenty-five percent of 18- to 29-year-old respondents believe they’d have to pay $1,000 or more.”
But cost wasn’t the main reason this age group turned down the insurance; 61 percent felt their personal property was already secure and 43 percent said they didn’t own enough to insure.
At the same time, 41 percent said they avoided buying it because they didn’t understand the product.
“If there is a break-in, the apartment owner has no obligation to the resident for damages or theft of their personal property,” Blinn said. “If there’s a fire, the renter has to replace their own items. It’s a way to protect themselves.”
The Insurance Information Institute says most renters insurance is broken down into three types of coverage: personal possessions, liability and additional living expenses.
The first is obvious — electronics, bicycle, bed, everything you own is covered in the event of a fire, smoke, lightning, vandalism, theft, explosion, windstorm, water and other disasters listed in the policy, according to the Insurance Information Institute (III).
Fire is one of the leading causes of damage for renters. There are an estimated 106,000 multifamily residential building fires each year causing $1.3 billion in property loss, according to the Federal Emergency Management Agency.
Floods and earthquakes are not covered by renters insurance, but if water seeps down on your stuff from the floor above, you’re covered.
To figure out how much coverage to buy, create a detailed list of all of your personal possessions, with their estimated value. III has a free online tool at www.knowyourstuff.org to keep an up-to-date home inventory. (Homeowners can use this as well.) The inventory will make filing a claim faster and easier and the tool is also available as a free app in the Apple or Google Play stores.
Renters need to decide between actual cash value policies that take into account the age of personal property and replacement cost policies that do not factor in depreciation. As with homeowners insurance, most recommend replacement cost policies.
Renters policies also have several features most people don’t realize are in the product.
According to the III, those typically include:
▪ Off-premises coverage. If one of your belongings is outside your home, it is still covered against the disasters listed in your policy. This includes property stolen from your car. This coverage is generally limited to 10 percent of your total, however. So if you have $10,000 worth of coverage, your off-site coverage may be limited to $1,000.
▪ Liability protection against lawsuits for bodily injury or property damage that you, family members and pets cause to other people. This part of a renters policy also pays for the cost of defending you in court and for court awards up to the limit of the policy.
▪ No-fault medical coverage, which means if someone is injured in your home, you can submit their medical bills directly to your insurance company. Policies are generally limited to $1,000 to $5,000 for this coverage.
▪ Additional living expenses if you have to move out while your apartment is being repaired.
Policies will generally reimburse the difference between your additional living expenses and your normal living expenses and will cover hotel bills, temporary rentals, restaurant meals and other related expenses.
“Renters insurance is a no-brainer,” Blinn said. “There’s no reason not to have it. It’s very inexpensive, and they typically have a quick payout. It could save them money in the end.”
Teresa McUsic’s column appears Saturdays. TMcUsic@SavvyCnsumer.net