Renters’ insurance is a form of home insurance for people who rent a home or apartment. The purpose of renters insurance is to protect the tenant leasing the property from damages to their personal property that may occur as a result of a fire, storm or other accident, as defined by the policy, that damages or destroys the rental property.
Most property owners who have rental property will have insurance on the property itself, which pays for the replacement or repair of the property if its damaged or destroyed by a covered occurrence. However, unlike insurance policies that cover properties in which the owner lives, most policies covering rental property don’t provide coverage for the personal property of the person leasing the apartment or home from the owner.
A renters’ insurance policy will provide coverage for your personal belongings in the event of a fire or other covered occurrence, and also usually covers additional living expenses that you may incur if your rental residence is made uninhabitable. Some policies even provide additional coverage for property you may take with you when you’re traveling.
Renters’ insurance is called an HO-4 policy by the insurance industry. The typical policy provides coverage from 16 types of occurrences, including:
- Damage from fire or lightning
- Damage from hail or windstorm
- Explosions
- Damages caused by riots or civil unrest
- Aircraft-related damages
- Vehicle-related damages (i.e. someone crashes a car into your rental home)
- Smoke damage
- Damages arising from vandalism or mischief
- Damages that arise from burglary of theft
- Damages from volcanic eruption
- Damages from falling objects
- Damages caused by the weight of ice, snow, or sleet
- Damages caused by water as a result of water or steam from a heating, plumbing, air-conditioning, or fire suppressant system or appliances
- Other HVAC-related damages
- Damages caused by the freezing of a plumbing, heating or air-conditioning device or fire suppressant system or household appliance.
- Damages from an artificially generated electric current
Coverage for additional occurrences can be purchased if you live in areas that are prone to earthquakes, floods or other disasters. Additional coverage will likely mean a higher premium, however.
Actual cash value or replacement cost coverage
When obtaining a policy, chances are that you’ll have to pick between a policy that offers actual cash value or replacement cost coverage. Actual cash value only pays for what your property is estimated to be worth at the time it is lost, stolen or damaged. For example, if you bought a computer four years ago for $700, chances are its value has significantly depreciated since then. If the computer is damaged or stolen, you’ll likely get much less than $700.
Replacement cost coverage will pay the full amount needed to replace the item that was damaged or stolen, minus your policy’s deductible. So if your computer is stolen, you’ll get the full amount needed to get a replacement. Obviously, because of the higher level of risk involved with a replacement cost coverage policy, the premiums for these policies are likely to be more expensive than for a ACV policy.
Liability
Many renters’ insurance policies come with liability coverage. This means that if someone is injured in your apartment or rental home and sues, your insurer will cover the cost of your defense in court and any judgments against you up to the limits of the policy. Additional umbrella coverage may also be obtainable. Some policies may even provide coverage for injuries you may cause outside of the apartment or rental home.
The importance of inventory
When purchasing a renters’ house insurance policy, it’s important to take an inventory of your possessions to ensure that you’re able to get the fair value for your things if they are stolen or damaged. Undocumented items may be denied coverage under your renters’ insurance policy.
You should photograph and take video of your things, and keep receipts of any new things you might buy in a safe place.
Reducing your premium
Renter’s insurance is generally pretty cheap, but there are a few things you can do to reduce premiums. The installation of burglar alarms or smoke detectors can result in a cheaper rate, and you may also get a discount if you buy other insurance products from the insurer, such as auto coverage.
Rates
The following is a list of average yearly renters’ insurance premiums by state for 2006, the most recent year reported on by the National Association of Insurance Commissioners.
- Alabama — $223
- Alaska — $182
- Arizona — $207
- Arkansas — $217
- California — $937
- Colorado — $813
- Delaware — $530
- D.C. — $185
- Florida — $201
- Georgia — $215
- Hawaii — $213
- Idaho — $153
- Illinois — $168
- Indiana — $173
- Iowa — $132
- Kansas — $170
- Kentucky — $161
- Louisiana — $245
- Maine — $145
- Maryland — $160
- Massachusetts — $223
- Michigan — $164
- Minnesota — $139
- Mississippi — $252
- Missouri — $166
- Montana — $160
- Nebraska — $148
- Nevada — $205
- New Hampshire — $157
- New Jersey — $179
- New Mexico — $200
- New York — $220
- North Carolina — $144
- North Dakota — $119
- Ohio — $163
- Oklahoma — $230
- Oregon — $162
- Pennsylvania — $148
- Rhode Island — $189
- South Carolina — $189
- South Dakota — $120
- Tennessee — $208
- Texas — $261
- Utah — $139
- Vermont — $160
- Virginia — $147
- Washington– $170
- West Virginia — $177
- Wisconsin — $122
- Wyoming — $155
- Nationwide — $189
