HOME IS WHERE THE HEART IS - RentersInsurance.com · 2017-08-20 · of another person. You need not...

HOMEIS WHERE

THE HEART IS

A Comprehensive Guide to Renters Insurance

Table of Contents

» A Guide to Renters Insurance / 02

» Glossary of Terms / 04

» What is renters insurance? / 06

» What is the difference between homeowners and renters insurance? / 07

» Am I required to have renters insurance? / 08

» What are the types of coverage available? / 09

» How does Actual Cash Value differ from Replacement Cost coverage? / 11

» What types of personal property is covered? / 13

» What types of personal property is NOT covered? / 14

» What are riders and how do they work? / 17

» How much does renters insurance cost? / 21

» Are there tips for reducing insurance premium amounts? / 26

» How do I find renters insurance? / 28

» In Summary / 29

» Appendix A: Inventory Worksheet / 30

Personal Property Coverage / 09Personal Liability Insurance / 09Temporary Living Expenses / 10

Common Limitations and Caps / 14Acts of Nature and God / 14Dog Bites / 15

A Guide to Renters Insurance

Renting your home has its benefits. As a renter, you are able to enjoy your home without the worry of costly repairs and maintenance since the building you live in is the responsibility of another person. You need not worry about how much longer the roof can survive leak free, or if the furnace is on its last legs, or how bad the windows rattled during the last storm.

As a renter, you do not need to worry about whether the next ice storm will damage the roof and cause water damage to the ceiling and walls of the home. The damage is not your responsibility to repair.

Renting is a worry-free living experience...

OR IS IT?

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What happens if that roof leak not only damages the ceiling, but

also your dining room hutch? Or your flat screen television?

What would you do if a tree limb crashed down on the garage

and destroyed your golf clubs?

What many renters fail to realize is that damage to the structure

of the home, or failure of a system within the home, can expose

their personal possessions to damage.

Some people believe that if the damage to their property is due

to the landlord’s failure to repair and maintain the building,

that the landlord is responsible for the damages to their property.

This is NOT true. In fact, renters agreements clearly state that

the owner of the property is not held responsible or liable for any

damages to the tenant’s personal possessions due to any known

or unknown causes.

This is where renters insurance comes in. Renters insurance is

your peace of mind against damage or destruction to your

personal possessions from fire, wind or water. Renters insurance

also protects you as a renter, against vandalism and theft.

If you are currently renting you home, whether it is in a condo,

apartment, townhouse, or a single family home, you should

consider protecting your possessions with the purchase of

renters insurance.


Glossary of Terms

Additional Living Expense (Loss of Use)

Coverage that pays for above normal costs incurred while the policyholder’s home is being repaired. These extra costs will include expenses such as food and lodging. This coverage generally does not apply to the costs of children living away from home.

Agent A Department of Insurance licensed professional who solicits and services insurance policies.

Coverage Indicates how much protection the insurance policy provides, either in the form of the dollar amount purchased or the type of loss covered.

Claim A demand to an insurance company for financial reimburse-ment to recover a loss.

Deductible A fixed amount, specified in the policy, that the policyholder agrees to pay towards the total amount of an insured loss.

Depreciation The decrease in home or property value, because of age or use, since the time it was built or purchased.

Exclusion An event or loss that is not covered by an insurance contract. The term can also be used to describe the provision that removes coverage for the event or loss.


Rider (Floater) Additional coverage for special items such as antiques or costly jewelry.

Independent Insurance Agent A licensed insurance agent who is not associated with a specific insurance carrier, but rather represents multiple insurance carriers.

Insured The person or persons covered by the insurance policy.

Inventory List of the insured’s possessions and their values.

Limit (Policy Limit) The maximum amount the insurance company must pay under the contract for a particular loss.

Premium The amount paid by the insured to the insurer in return for insurance coverage.

Insurer The company that is underwriting the insurance contract.

Liability Legally enforceable obligations.

Peril The cause of a loss, such as theft or fire.

Risk The chance of loss.


What is renters insurance?

Renters insurance is insurance purchased by persons who are renting their home. They may

live in an apartment, condo, townhouse, flat, or a single family dwelling, such as a house.

Renters insurance is also available to persons who rent space within a storage facility to store

their personal or corporate belongings.

Renters insurance protects the insured against damages to their personal belongings in

the event of a fire, water damage, vandalism, or theft.


What is the difference between homeowners & renters insurance?

A primary difference between homeowners insurance and

renters insurance has to do with who is responsible for insuring

the dwelling itself. Homeowners insurance covers both the

physical dwelling and the contents within the dwelling. Renters

insurance only covers the possessions owned by the renter that

are kept within the dwelling.

For example, a family is renting a three-bedroom house.

During a heavy snowstorm, the roof develops a leak and causes

severe damage to the ceiling and one wall in the living room.

In addition, the family’s television and stereo system is damaged

and rendered inoperable by the water from the ceiling.

The family’s renters insurance would cover the costs to replace

their personal property, which is the television and stereo system.

The owner of the home would be solely responsible for the

damage caused to the roof, ceiling, and walls. Using this same

example, if the family living in the home also owned the

home, their homeowners insurance would assist with repairing

the damage to the building (roof, ceiling, walls) along with

replacing the personal property in the home.


Am I required to haverenters insurance?

Renters insurance is not legally required. However, landlords may require tenants to

acquire rental insurance as a condition of the rental agreement.


What are the types of coverages available?

Basic renters insurance includes coverage for personal property along with liability and temporary housing coverage.

Personal Property CoverageThe most commonly known component of renters insurance

includes a personal property coverage plan. Personal property

coverage either pays you the current value of your personal

belongings or pays to replace them, depending on the amount

of coverage you purchase. This coverage kicks in if your

personal belongings such as clothing, furniture, electronics,

or hobby/sports equipment (to name a few), are damaged,

destroyed, or stolen.

Personal Liability InsurancePersonal liability insurance is included as a standard component

within renters insurance. It is also included in homeowners and

vehicular insurance policies.

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Personal liability insurance covers against unintentional injury

caused to others (while on or off your property) or damage to

their personal property caused by either you (the insured) or a

member of your family.

Temporary Living ExpensesIn the event the rental home you are living in is damaged or

becomes unlivable, renters insurance will provide monetary

assistance for you to find temporary living arrangements while

the rental home is being repaired. This may include a daily,

weekly, or monthly per diem to offset hotel costs, including

meals and other daily expenses.

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How does Actual Cash Value differ from Replacement Cost coverage?

Personal property coverage is either Actual Cash Value or replacement cost. The type of coverage determines how much you will be reimbursed when you file a claim for personal property damage.

Actual Cash ValueActual Cash Value, often referred to as ACV, is the basic form of

renters insurance, and the cheapest to purchase.

Let’s imagine that your three-year old laptop computer was stolen.

Three years ago, the laptop computer cost $1,500 to purchase.

When determining the insurance value today, the insurance

company will calculate the current value of your laptop using

basic accounting principles that account for use and wear and

tear. The insurance company will then provide you with a

check for the depreciated value. This amount may or may not be

enough money to replace your laptop with a comparable model.


Replacement CostReplacement cost coverage is just that —it replaces your personal

property with comparable products and technology in the

current economy. Using our ACV example, if your three-year

old laptop was stolen, you would receive a check in the

amount necessary to replace your laptop with a similar laptop

in today’s economy.

For example, if a comparable laptop in today’s market cost $800,

you would receive $800 to purchase a new, comparable laptop.

However, if a comparable laptop cost $1,700 in today’s market,

you would receive $1,7000, the full amount necessary to replace

your laptop.

Because replacement cost does not take into account any

depreciation and is expected to replace your personal property

in full, this insurance coverage usually costs more than

ACV coverage.

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What types of personal property is covered?

Personal property includes the entire scope of the personal property you own, even if you purchased it on a credit card or store loan and still owe money on the item.

Here are some examples of personal property that

you may own that is covered by renters insurance:

» Clothing

» Furniture

» Electronics

» Kitchenware: pots, pans, dishes, bake ware, china, crystal

» Sporting goods equipment & accessories:

golf, hockey, scuba, bicycles

» Knick knacks & household decorations

» Appliances that belong to the renter

» Musical instruments

» Luggage

» Jewelry

» Guns & firearms

» Antiques, art, & stamp collections


What types of personal property is NOT covered?When purchasing renters insurance, like any other form of insurance, your should inquire about any exclusions, limitations, caps, and disclaimers of the insurance policy.Unfortunately, many insureds don’t find out these limitations and disclaimers until they file a claim for a loss.

Be sure to read all of the fine print very closely and have your professional insurance agent clearly explain any limitations of your policy before you agree to the purchase.

Here are some common exclusions, limitations, caps, and

disclaimers within the insurance industry. Keep in mind that

this list varies from state to state and also between the

various insurance carriers.


Common Limitations and CapsWhile all of your personal property will be covered by renters

insurance, the amount provided to you for replacement may

have certain monetary limitations and caps. Most commonly,

renters will find that their fine jewelry, guns, and fine art will

be capped if they exceed a certain value. Thus, if the cap on fine

jewelry is set at $1000, even if your jewelry is worth $5000, you

will only receive a maximum of $1000 under the policy.

One way to overcome this loss is to take out insurance riders or

options to cover the full value of the items.

Acts of Nature and GodRenters insurance will normally cover damage to your belong-

ings caused by fire, wind, and flood. However, depending on the

region you live in, certain forms of fire, wind, and flood damage

may be excluded. Normally, all policies have an “Acts of Nature”

or “Acts of God” clause excluding these forms of damage.

The most common exclusions include:

» If you live in a known or categorized flood zone, flood damage

caused by nearby rivers, lakes, and streams may not be covered.

» If you live in a region susceptible to forest fires, fire and smoke

damage caused by forest fires may be excluded from coverage.

» If you live in a region considered a hurricane path, flood and

wind damage due to hurricanes may not be covered.

Before purchasing renters insurance, verify with your profes-

sional insurance agent if the home you are renting resides in a

natural flood, fire, or hurricane zone. If it does, you may want


to consider purchasing additional insurance that will protect you

in the event of a natural disaster.

Dog BitesAnother common exclusion is injury caused to others by the

renter’s pet, most commonly a dog. Although renters insurance

covers personal liability, which is injury caused to another

person or damage to another person’s property, it generally does

not include injury to another person caused by the insured’s dog.

To protect yourself from civil action, as a renter, you should

consider purchasing a pet insurance rider. This will protect you

for injury caused by your dog to another person. Additionally,

a pet insurance rider will also protect you against excessive dam-

age caused by your pet to the rental property where you reside.

Some insurance companies will not cover certain breeds of dog

that have been designated “vicious” or are banned by the city,

county or township where the renter resides. In fact, if you own

such a breed, your insurance premiums may be higher than

normal as a reflection of the pet.

*CAUTION: Do not confuse a pet insurance rider with medical

pet insurance for your pet. A pet insurance rider does not provide

assistance for the care or maintenance of your pet, but rather

protects you against any monetarily obligations resulting from

the actions of your pet.


What are riders and how dothey work?

As mentioned in the previous section, many insurance companies will limit, cap, or exclude certain personal property, such as fine jewelry or may not cover your loss in the event of a natural disaster, such as a tornado.

That is where a rider comes in. Riders are additional forms of insurance coverage that you can purchase. A rider will further insure specific possessions or specifically protect you against a specific action.

The best way to determine if you need any optional riders, is to speak to your professional insurance agent about the type of dwelling you are renting, the location of the dwelling, and also your work and lifestyle habits.


Following are some typical insurance riders that are available:

Scheduled personal property endorsement (personal property floater)A scheduled personal property endorsement is the rider used to

further protect your possessions of high value. This includes

jewelry, guns, art collections, and other forms of personal prop-

erty that have a value in excess of the stipulated coverage on

your particular policy.

Special computer insuranceSome insurance companies limit or cap the value of computer

and other electronic related items. If you have computer servers

or high end equipment, such as a high-definition large screen

television, you may need a rider to protect your investment.

Theft coverage protection endorsementWhile theft is normally a covered form of protection, it may have

limitations. Speak with your professional insurance agent to

determine if your policy will have any limitations or caps to the

amount covered by theft.

Home business, business merchandise cover-age, and incidental business liability More and more people are working from home offices or run-

ning businesses out of their homes. However, not all insurance

policies will cover losses to home business equipment or liability

from injury occurring from a home business. If you work from

your rental home, you may need insurance riders to protect you

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against loss to your business equipment or any injury liability

to others.

*CAUTION: Read your rental agreement carefully and verify that you are

not prohibited from running a business out of your rental home. Should

loss occur, and a conflict exists between your rental agreement and your

insurance policy, you may not be able to file a claim for the loss.

Watercraft and recreational vehicle endorsementA watercraft and recreational vehicle endorsement protects your

boat, jet ski, or camper from loss while it is parked or stored at

the rental property. It does not cover the operation of boats or jet

skis, which require their own licensure and insurance.

TIP: Verify with your automobile insurance carrier if storage of

your watercraft or recreational equipment is covered on your

auto insurance. You may not need a rider on your rental insur-

ance policy if it is.

*CAUTION: Read your rental agreement carefully and verify that you

are not prohibited from storing watercraft or recreational vehicles on the

rental property. Should loss occur, and a conflict exists between your

rental agreement and your insurance policy, you may not be able to file a

claim for the loss.

Sewer and drains back-upLike flood, tornado, and hurricane disasters, damage from sewer

and drains backing up may be excluded on your standard rental

insurance agreement. This is especially true if you live in a zone

where sewage backups are common. Speak with your professional

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insurance agent to determine if you will need this form of

coverage to protect your personal belongings.

Workers’ Compensation Workers’ compensation is required by law by all businesses with

a minimum amount of employees. However, with more

and more families opting to hire full time (and live-in) help,

it is becoming a necessity for these families to consider

purchasing workers’ compensation.

If you hire a person to live in your home and perform a service

on a full-time basis, you may be required to provide workers’

compensation for the individual. Common services include:

» baby sitters

» au pairs

» nannies

» housekeepers

» assisted living care givers

Speak with your professional insurance agent to determine if

you should provide workers’ compensation for your baby sitter,

housekeeper, or assisted living care giver.

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How much does renters insurance cost?Renters insurance is very affordable and is paid by the insured

on either a monthly, quarterly, or annual basis. Many factors

affect the cost of renter’s insurance. For example:

» The dollar amount of coverage

» The deductible amount

» If the coverage is ACV or Replacement Cost

» If there are additional riders on the policy

» The region where you reside

» The number of previous claims submitted

» The insurance carrier’s risk and actuarial formulas

The dollar amount of coverage: The dollar amount of coverage is one of the leading factors

in determining the cost of a renter’s insurance policy. The dollar

amount of coverage is the total fixed-price amount representing

the entire value of the renter’s personal property.

The easiest way to determine the entire value of your possessions

is to create an inventory of all of your tangible possessions and

determine the replacement cost for each item, at the time of the

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inventory. You may use the worksheet provided in Appendix A

to help you create a comprehensive inventory.

TIPS:

» Keep the physical receipt of all large-item purchases you make,

such as furniture, jewelry, and electronics together in a folder

labeled, “Possession Inventory.” You should keep this folder or

a copy of it in a safety deposit box or somewhere other than

in your home. In the event damage or theft occurs, you will be

able to provide the actual receipt of the item to your claims

adjustor.

» Be sure your inventory list and/or the item’s receipt includes

any serial numbers necessary. This will also assist the police in

the event of theft.

» Photograph any items where you do not have original receipts,

as proof of the item’s existence and/or condition. You may

use the Internet to download and print copies of spec sheets or

photographic images of your possessions.

» Photograph any items of greater monetary value, especially

firearms, jewelry, and artwork.

» When buying electronics, such as computers or printers, print a

copy of the specification sheet that identifies the make and

model, including the size of the hard drive, RAM, processor,

and components (DVD R/RW, stereo sound, video graphics

card). This will assist the claims adjuster in determining the

correct replacement costs for a comparable unit.

$$$


The deductible amount: The amount of the deductible you are willing to pay will

determine the cost of your insurance premiums. The deductible

is the amount of money the renter is willing to pay out-of-

pocket before a claim is paid by the insurance carrier.

For example, you submit a claim to replace your water-damaged

sofa. The insurance adjustment process identifies that the

replacement cost of your couch in today’s market is $1,200. If

you have a $500 deductible, the insurance company will deduct

the $500 amount and provide you with a check for $700.00.

On the other hand, had your deductible been $250, you would

have received a check for $950. Deductibles are standardized

across the industry at $100, $250, $500, and $1,000. Some insur-

ance carriers may offer amounts in excess of $1,000.

Generally, the higher the deductible, the lower the premium.

However, the higher the deductible, the greater the out-of-pocket

risk to the insured.

If the coverage is ACV or Replacement Cost:The type of coverage you have will also determine your premium

amount. Actual Cost Value (ACV) generally costs less because

the insurance company is paying you the depreciated amount for

your damaged or stolen property. The depreciated amount

paid out by the insurance carrier will typically always be less than

the cost to fully replacement an item in today’s market. Be

aware that some items, such as electronics, will depreciate faster

than other items.


If there are additional riders on the policy:Your insurance premium will also be affected by the type and

number of additional riders you have, such as optional pet

insurance or a rider to cover a higher value of fine jewelry. The

affect these riders will have on the premium amount varies

between states and insurance carriers.

The specifics of where you reside: Details about where you reside will also affect your premium.

Insurance premiums are based on a series of calculated risks and

future assumptions based on historical data. Thus the region

where your possessions will be located plays a part in determin-

ing the risk calculations. Insureds that are living in areas with a

higher crime level will experience higher premium amounts than

similar families living in areas where crime is less frequent.

Factors such as whether you are living in a single family dwelling

or a multi-family dwelling and what floor you live on will also

affect the premium.

Furthermore, even though your renters insurance doesn’t cover

the building itself, how the building is constructed can

affect the cost of insurance. Building construction plays a role in

determining how safe your belongings are. For example, if the

apartment next to yours was to catch fire, would your apartment

suffer residual damage from smoke and water? Buildings that

have greater wall thicknesses and infrastructures are considered

less of a risk than those that do not.


The number of previous claims submitted: Your personal insurance claim history will also be used to calcu-

late your insurance premium. Insureds that have submitted

claims in the past generally experience slightly higher premiums

than insureds that have not made any claims. However, most

insurance carriers will allow one claim per every three years before

they include claim history in the rate calculations.

The insurance carrier’s risk & actuarial formulas: Insurance is all about risk. And the cost of insurance is directly

related to the perceived risk taken on by the insurance company.

The risk for the insurance company in providing insurance is

equal to the likelihood that an insured will need to file a claim.

Insurance companies calculate this risk by using special formulas.

An important thing to remember when purchasing any form of

insurance, whether it is auto, home, life, health, or renters insurance,

is that the insurance carrier is allowed to create its own risk formu-

las. And, some insurance carriers are more conservative than others.

The more conservative an insurance carrier is, the more expensive

the insurance coverage is likely to be.


Are there tips for reducing insurance premium amounts?

The best method for paying lower premiums is to shop around and evaluate comparable policies to find the best premium available for the greatest amount of coverage.

If you already own a renters insurance policy, getting a policy

check-up may result in lower premiums. As time goes by, your

insurance risk may adjust to a lower rate, especially if you have

not filed any claims. However, very few insurance companies will

monitor and adjust your premium based on history, unless

you contact them for a policy review. Unfortunately, insurance

for many people is left “as is” for years upon years. You could

be saving hundreds of dollars by doing an insurance “checkup”

with your current insurer or, even better, shopping around for

a new carrier.

A good rule of thumb is to do a policy checkup on your insurance

needs every two to three years and compare their rates against

other carriers in your market.


Other tips to reduce your insurance premium amount include:

» Choose ACV coverage instead of full replacement cost value

coverage. If you have a limited amount of possessions you may

find the ACV coverage, which is generally less expensive, is

sufficient for your needs.

» Assume more risk through a higher deductible amount.

» Be sure to notify your insurance agent of any security measures

in your rental home, such as gated community entrances and

buildings. Other items include:

> smoke detectors

> fire extinguishers (in apartment & communal hallways)

> deadbolts

> monitored security systems, such as ADT or Brinks

> sprinkler systems (in apartment & communal hallways)

» Purchase renters insurance through your automobile/motor

cycle insurance carrier. Many carriers offer multiple product

discounts, such as combined renter’s and auto insurance.


How do i find renters insurance?

Almost every homeowner and automobile insurance carrier will also provide

renters insurance. The best way to find renters insurance is to work with an independent

insurance agent.

Independent insurance agents generally sell multiple insurance products through a variety

of insurance carriers. An independent insurance agent can provide you with several

policies to review based on your insurance needs and quote to you the best price available.

To locate an independent insurance agent in your area, do an

internet search for “Independent Insurance Agents city state”

where city and state represent your actual city and state.


In summary...» Renters insurance is a comprehensive insurance plan that will:

> Insure your personal belongings against damage,

destruction, and theft;

> Protect you against civil lawsuit; and

> Provide temporary living expenses aid if your rental

home should become unusable.

» Your personal property can be insured through Actual Cash

Value (ACV) or Replacement Cost coverage. Replacement cost is

more expensive but does not take depreciation into account

when determining a claim.

» Some policies may have exclusions, limitations, caps, and

disclaimers. Be sure your insurance agent provides you with a

comprehensive description of any limitations or exclusions

before you finalize the policy.

» You may purchase riders to supplement your basic policy.

» Many factors affect your renters insurance premium, including

the insurance carrier’s own formulas. Always shop around and

find the best insurance for your needs and budget.

» Use an independent insurance agent who can provide multiple

quotes for your review and consideration.

» Perform an insurance checkup every 2–3 years by shopping the

market and comparing coverage and rates.


Appendix A:Inventory Worksheet

PURCHASE PRICE DATE PURCHASED

INVENTORY WORKSHEET

Furniture

Furniture

Paintings, art objects


Draperies, rugs

Draperies, rugs

Lighting, ceiling fan


Electronics

China, crystal

Silver, pewter

Other

Other

LIVING ROOM

DINING ROOM

PURCHASE PRICE DATE PURCHASEDLIVING ROOM PURCHASE PRICE DATE PURCHASED

01


INVENTORY WORKSHEET

Furniture

Furniture

Curtains, rugs

Dishes, glassware, silverware

Draperies, rugs



Appliances

Computer equipment

Books

Other

Other

KITCHEN/UTILITY ROOM

OFFICE

PURCHASE PRICE DATE PURCHASEDKITCHEN/UTILITY ROOM PURCHASE PRICE DATE PURCHASED

02

INVENTORY WORKSHEET

Furniture

Furniture


Draperies, bedding, rugs



Clothing


Electronics

Jewelry

Electronics

Clothing

Other

BEDROOM TWO

Other


MASTER BEDROOM PURCHASE PRICE DATE PURCHASED

03

INVENTORY WORKSHEET

Towels

Curtains, rugs

BATHROOMS PURCHASE PRICE DATE PURCHASED

Electrical appliances

Other

Furniture

Lawn mower

Edger, blower

Other

LAWN AND GARDEN PURCHASE PRICE DATE PURCHASED

Furniture



Electronics

Clothing

Other

BEDROOM THREE PURCHASE PRICE DATE PURCHASED

04

INVENTORY WORKSHEET

Luggage

Musical instruments

Cameras, video equipment

Exercise, sports equipment

Bicycles, toys

Hunting, fishing equipment

Tools

MISCELLANEOUS PURCHASE PRICE DATE PURCHASED

Other

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