In your twenties you may have backpacked across the country or spent years as a Peace Corps volunteer in Africa or Peru, living with less than 30 pounds of personal belongings. That is not likely to be the case today. Instead, you own a closet full of clothing, furniture, books, computers, family heirlooms, appliances and jewelry. A lifetime’s accumulation. If you are a homeowner, it is all protected by your home owners insurance. But what if you are a renter?
Your personal possessions will not be covered under your landlord’s homeowners insurance, should any natural or human incident lead to loss or damage. Renters insurance is very specific coverage, is relatively inexpensive and is something every level-headed senior should have. Get a quote!
If you owned your home, you would not think twice before buying homeowners insurance, even if your mortgage company did not require it. And, that insurance would cover your belongings against theft and damage in case of fire, water and certain natural disasters.
For some reason, renters are far less likely to buy protection (95 percent of homeowners versus 41 percent of renters). Yet the average cost of a renters insurance policy is $190 per year, a low price for all the peace of mind it would bring.
If you think your landlord’s insurance will cover you, think again. It covers the destruction of the building but not its contents, which are most likely yours. The easiest way to solve the problem is to start with an online quote. This quote will reflect your personal wishes, your personal and credit profile, other insurance policies you could bundle with your renters policy, the construction and location of where you live.
Once you decide renters insurance is for you and you have identified the coverages you would like, you would identify 4-5 major insurance companies, request similar quotes and select the one that makes the most financial sense to you.
One argument seniors have against renters insurance is its cost (although modest), especially those living on fixed incomes. However, if something major were to happen, how would they ever replace critical belongings? While jewelry and family heirlooms may have more sentimental value than market value, even compensation in case of their loss would help a senior re-establish a normal life.
Renters insurance may be required by the landlord, especially in large complexes, and may be written into the lease. It is a way that landlords can protect themselves from being sued by tenants in case of a major hazard. Remember that, especially in multi-unit houses or apartment buildings, you are only as safe as the most irresponsible person in the building. Besides, in buildings with mostly elderly tenants, the risks of fires caused by carelessness or mental lapses can be high.
Renters insurance also protects you against personal liability for any claims against you that result from injury or damage to others or their property while in or around your home.(Seniors do have a propensity to slip and fall.)
In short, having adequate renters insurance:
- Protects your possessions against a human or natural disaster, or theft;
- Safeguards any assets you are counting on passing down to children as part of your estate;
- Keeps you from having to dip into critical resources to cover losses, especially if you are past your income-generating days;
- Guards your finances against lawsuits by visitors or workers who injure themselves on your property; and
- Provides peace of mind so you can rest easy whether you are on guard at home or not.
Selecting a renters insurance policy is based on price, coverage and ease. You will want to know the annual premiums, the ease of obtaining coverage, what is covered, how fast the plan goes into effect and how available the company’s representatives are when you need them.
Next, you will want to know more about the mechanics of the policy: access to online quotes and online purchases, availability of local agents and discounts. As for billing: accepted payment methods, mobile apps and access to paperless billing.
Renters insurance covers possessions stored in the rental property against ‘named perils.’ This means your policy will specify exactly what perils you are insured against. The most common ones include theft, vandalism, water damage, fire, smoke and lightning, but others exist as well. Your quote should list them specifically, as any peril not listed will not be protected against.
The first step in selecting a renters insurance policy is to understand the different types of coverage available.
Standard coverage: this is the part of the policy that is included automatically in nearly all renters policies but may vary in detail from company to company. Look for four standard provisions:
- Personal property coverage, which covers the cost of belongings lost or stolen in an incident at home. This includes furniture, clothing, appliances, electronics and personal effects, valued typically between $10,000 and $100,000, or higher. Inventory everything, get retail prices to replace each item and take photos to support any future insurance claim.
- Loss of use coverage, which includes relocation expenses or additional living expenses related to temporary lodgings in case you lose access to the rental premises.
- Personal liability coverage, which helps pay for bodily injury or property damage from claims of others in and around your home for which you are being held responsible. This includes visitors, repair people or even the landlord.
- Medical payments coverage, which covers medical costs of any houseguests injured in your rental home whether or not you are liable. This does not cover you or other members of your household.
Optional coverage, or endorsements: this part of the policy is designed by you from the coverages available through your insurance company. Consider:
- Off-premises coverage, for possessions in common areas of the premises, in your vehicle or even luggage lost during travel.
- Scheduled personal property, which extends coverage beyond the normally low limit for items such as computers, firearms, jewelry, furs, silverware and art by ‘scheduling’ them at their full value. Business-related property should be specified separately as well.
- Identity theft protection, which covers the cost of rebuilding from identity theft.
Many possibilities exist, although there are some perils that few renters policies cover, such as flooding, earthquakes, nuclear hazards and hurricanes. (Flood, earthquake and windstorm insurance might be available for purchase separately.) Ask your potential insurance companies to supply you with their exhaustive lists to ensure you have not overlooked anything critical. Also, be certain to advise if you have extensive business assets or frequent business visitors to the property to be sure they too are covered.
Coverage Limits: On personal possessions, ideally coverages should be calculated at replacement cost in your region, and not on how much you paid. Your goal is to replace what you lost. If you have a detailed inventory with pricing, it will give you an estimate of the value. If not, many insurance company websites provide access to a calculator that helps you estimate the cost of your possessions.
You will be given a choice between Replacement Cost (what you would pay today to have the same thing) and Actual Cash Value (which takes depreciation into account). Premiums for Replacement Cost are more expensive than with Actual Cash Value, but if you can afford the premium, Replacement Cost is best.
For your ‘loss of use’ coverage, estimate what living in a hotel would cost for 30 days while your rental premises are being repaired.
For liability, most landlords will require $100,000 of liability insurance. However, for a small increase in premium, you might want to consider $300,000 to avoid putting your retirement assets at risk.
Deductibles: A deductible is an amount the insurance company subtracts from what it pays on a claim. A $500 deductible is typical on a renters policy, but deductibles can run to $1,000, $2,000 and $5,000. It all depends on what you can afford to pay out of pocket, but the higher the deductible, the lower the premium. Depending on your finances, take the highest deductible you can afford.
Discounts: You want to review a full list of possible discounts to see what might pertain to you. That list could include:
- multiple policies with the insurance company (or bundling);
- protective devices such as smoke detector, security system or sprinklers;
- a claims-free history;
- retiree/senior citizen (usually 55+);
- loyalty as a long-time client;
- continuous coverage (an active policy still in place); and
Once you are clear on what you want your renters insurance policy to cover, it is time to identify 4-5 insurance companies with good reputations and solid finances based on their Financial Strength Rating by A.M. Best. Also, J.D. Power publishes a “U.S. Property Claims Satisfaction Study” and a “U.S. Home Insurance Study” that rank customer satisfaction by company. A simple internet search will find the latest reports, which will give you an idea of the service you can expect.
With your coverage and deductible information in hand, contact each candidate company on your list. Ask what discounts are available since that information is rarely volunteered. Request a quote, whether provided online, by phone or through a broker. Review the quotes you receive and select the one that works best for you.
While seniors prioritize the same decision-making basics as younger renters, two additional areas should be explored with each potential insurance company: age-friendliness and health-related value.
Age friendliness: This measures how convenient a service is and how easily it adapts to your changing needs as you age. Company representatives should know enough to understand how aging might affect your insurance needs and how changes to your policy might help keep your premiums low. Communications should be easy. The company’s website should be intuitive and easy to navigate. Bill-paying and claims-processing procedures should be clear.
Health-related value: This reflects how a service might change in value as a person’s health declines. In the case of renters insurance, this would primarily reflect how often the renter is at home, versus in the hospital or eventually in assisted living. The company might be able to provide suggestions of how to keep a home safe as its residents weaken due to health concerns.
The cost of renters insurance rests on the same factors as most other similar insurances: the coverage and deductible you select, your history of claims and use of the property. However, other factors also play a role:
- a tornado- or hurricane-prone region;
- a high-crime location;
- the distance from hydrants;
- the construction of the building (brick versus wood);
- the age and condition of the building;
- any dangerous breeds of pets;
- the number of occupants; and
- the type of business being run out of the home.
A recent report by the National Association of Insurance Commissioners (NAIC) cites the average cost of renters insurance as between $15 and $30 per month. These rates vary from state to state: in 2014, lowest-cost North Dakota averaged $114 per year, while highest-cost Mississippi averaged $262 per year.
While it might seem like an unnecessary expense, renters insurance is an inexpensive form of protection when compared to the value of what it protects, especially if you are on a limited budget and would have difficulty rebuilding your life.
The elements you want to examine as you explore different rental insurance options include the annual premiums, the ease of enrollment, what is covered, any waiting period and the access to customer support.
Cost: Your renters insurance must fit within your budget, so you may need to work with your selected insurance company to adjust coverages and deductibles. Be sure to call upon every discount offered by the insurer for which you qualify. The policy you design should reflect the risk you are willing – and able – to take in terms of financial and physical loss.
Ease of enrollment: The terms used in renters insurance policies are not ones we deal with every day, so an insurer can make the process easier by facilitating the decision-making process. Readily available information and assistance is a good start. Offering several ways to enroll (through a website, by email and by phone) is helpful, too.
Coverage: Coverage starts with what each company considers to be its basic or ‘standard’ policy. The next step is to see how to enhance the offering with optional coverage, or endorsements, that tailor the policy to your needs. Because of the ‘named perils’ nature of renters insurance policies, what is not cited is as important as what is cited, so do not take anything for granted. Insurance companies take nothing for granted when it comes time to pay claims.
Waiting period: A renters insurance policy can be set up to become effective on a specific date, say to coincide with the date you move into a new home, or the date the policy you are replacing ends. Most insurance companies will have a waiting period before you can file a claim, though, often from 30 to 90 days.
Customer service: The quality of a company’s customer service rests on several factors: the hours of its availability, how friendly the website is, how easy it is to find decision-making information, and the simplicity of its bill-paying and claims-processing processes. The importance of these factors increases as seniors age or decline in health.
Renters insurance is one of the wisest investments we can make, considering its low cost and high level of protection. While many of us toy with the concept of minimalism and dream of decluttering our homes, to lose our possessions to an unexpected incident – natural or caused by humans – is more disruptive and costly than we can imagine.
One recent incident, Hurricane Harvey in Houston, Texas, taught some invaluable lessons regarding renters insurance. Homeowners are very aware of the need for special flood insurance if they are in certain low-lying areas that could possibly flood. They know flood damage is not covered by their regular homeowners' policy. Renters insurance does not cover such damage either, yet too few renters give this any thought.
The number of households that rent their home has increased in recent years to nearly 36 percent of households, yet only around 2 percent of the 5 million flood insurance policies in force across the U.S. are for a rental property. The rental rate among Americans age 65 or older has remained steady around 20 percent, but that still reflects many unprotected renters. Special windstorm protection in the case of hurricanes and tornadoes is likely to be similarly underrepresented.
Renters can get coverage of damage done by floods, hurricanes or tornadoes by taking out a separate insurance policy or by getting a rider to an existing renters insurance policy for each hazard. (A rider is an optional coverage that is added to your existing policy, with its own set of terms and conditions which become an integral part of your original policy.)This coverage is only for your possessions and not for the building itself. Therefore, while it is not inexpensive, compared with the cost of coverage for homeowners it is much more affordable. What is not affordable is taking a total loss and not having any such coverage.