Renters Insurance FAQ

• Why should I buy renters insurance?

• Does renters insurance cover all my personal belongings?

• Is property such as a laptop computer covered when I'm away from home?

• If I file a claim, will my policy be canceled?

• As a student, am I covered by my parents' policy?

• Can I puchase a renters policy with my roommate or domestic partner?

• What happens if something I've rented or borrowed is stolen?

• What if I have problems with my insurance company regarding a claim?

• What are the limits on a standard renters policy?

• How does a renters policy protect my personal property?

• What is the difference between "actual cash value" and "replacement cost" coverage?

• Why do some apartment complexes require tenants to have renters insurance?

• Which extra coverage should I consider adding to my renters policy?

• How does an insurance company determine my renters insurance premium?

Why should I buy renters insurance?
If you live in an apartment or a rented house, renters insurance covers you and your possessions. A standard renters policy protects your personal property in many cases of theft or damage, and may pay for temporary living expenses if your rental is damaged so seriously you can't live in it. It can also protect you from personal liability.

Does renters insurance cover all my personal belongings?
Yes, if they're insured properly. Items like jewelry and computers often have a per-category theft limit (for example, some policies have a $5,000-$10,000 limit for computers). If your belongings exceeded your policy's limits, you would need to buy a floater or rider to provide higher limits and more coverage.

Is property such as a laptop computer covered when I'm away from home?
Yes, but coverage may be limited and the conditions may vary. Ask your insurance agent for details.

If I file a claim, will my policy be canceled?
If you didn't cause the loss, your insurance shouldn't be affected. If you were at fault -- if you caused a fire by smoking in bed, for example -- the insurance company might not renew your policy. Your insurer also might not renew if you file several claims within a short time.

As a student, am I covered by my parents' policy?
If you're a full-time college student and part of your parents' household, their homeowners or renters insurance might give you limited coverage in the dorm, but not if you live off campus.

Can I purchase a renters policy with my roommate or domestic partner?
Regulations differ from state to state, and policies might also differ by company. Find out what regulations apply in your state, then shop around to find a company to suit your needs. Some insurance companies allow unmarried couples living together to obtain joint coverage. But a domestic partner is usually not automatically insured like a husband or wife under the partner's policy. He or she must be specifically named.

What happens if something I've rented or borrowed is stolen?
Items "in your possession" are covered under a standard policy, whether they're possessions, gifts or someone else's belongings.

What if I have problems with my insurance company regarding a claim?
Provide all the documentation the company requested. Talk things over with your agent or company representative. Also, your state insurance department or local consumer protection office can answer questions on filing claims, and take complaints.

What are the limits on a standard renters policy?

[Note: this answer is based on the Insurance Services Office's HO-4 policy.] A renters policy usually contains four sections: C, D, E, and F.

• Coverage C protects your personal property, (e.g. furniture, CDs, stereo and clothes). You choose a dollar amount limit (what you think your possessions are worth) when you purchase the policy.
• Coverage D covers loss of use - the expenses you face when your apartment can't be used due to an insured loss. This is usually 20% of your personal property limit.
• Coverage E covers your personal liability claims and suits for bodily injury or property damage. You choose this limit when you buy the policy.
• Coverage F pays for medical expenses for minor injuries to others even if you were not at fault. The policy normally includes limits of $1000 per person.

How does a renters policy protect my personal property?
A renters policy covers "named perils" listed on your policy. These usually include:

• Fire or lightning, windstorm or hail
• Explosions
• Riots
• Aircraft
• Vehicles
• Smoke
• Vandalism
• Theft
• Falling objects
• Weight of ice, snow, or sleet
• Accidental discharge or overflow of water or steam
• Sudden and accidental tearing apart, cracking, burning, or bulging
• Freezing
• Sudden and accidental damage from artificially generated electrical current
• Volcanic eruptions (but this doesn't include earthquake or tremors)

Renters coverage applies to your personal property no matter where you are in the world. You're covered when you are on vacation as well as at home.

What is the difference between "actual cash value" and "replacement cost" coverage?
These are two ways to calculate how much the insurance company will pay if you report a loss. Standard renters policies cover the actual cash value of personal property. Payments are based on the replacement cost of the property minus a deduction for physical depreciation and obsolescence. If you add replacement cost coverage (for an additional premium), the company will pay one of the two amounts below, whichever is lower?

1. the cost to replace the property with a similar type and quality of property without a deduction for depreciation, or
2. the full cost to repair at the time of the loss.

Why do some apartment complexes require tenants to have renters insurance?
Owners carry property insurance for protection in case the apartments are damaged. But if a negligent tenant causes damage, the owner's insurer will sue the tenant for the amount of damage caused. So being covered is a good idea.

What extra coverage should I consider adding to my renters policy?
Endorsements are optional changes to your main renters policy. They can cover perils or property not covered by the standard policy. You may want to consider the following:

• Earthquake endorsement
  The standard renters policy does not cover earthquake losses. If you live in an earthquake-prone region, you may consider this. The mandatory deductible (the portion of the loss that you pay) is 5 percent of your Coverage C limit.

• Personal injury endorsement
  Generally the personal liability portion of a renters policy covers bodily injury to others (defined as physical injury, sickness, disease, or death). This endorsement adds personal injuries to the definition. Personal injuries (such as emotional damage) can arise out of false arrest, libel, slander or defamation, or invasion of privacy. A personal injury endorsement broadens your personal liability coverage to include claims for personal injury or suits arising out of these offenses.

• Business pursuits endorsement
  This endorsement extends the liability coverage of the policy to certain business-related pursuits listed on the endorsement.

How does an insurance company determine my renters insurance premium?

• Territory
  Where you live influences your rate because certain regions are more subject to specific perils, such as hailstorms in parts of Texas.

• Public fire protection class
  The degree of fire protection provided in your area is ranked on a scale of 1 (best) to 10 (worst). Areas with no fire department within 10 miles, or with a very poor water supply, may rank as 10.

• Construction
  The construction type of your building (such as frame or masonry) can affect the premium you pay. If you live in an apartment building, the number of apartments per building is noted.

• Coverage amount
  The limits of liability or dollar amount of coverage you select will affect your premium.

• Additional coverages and endorsements
  Increasing your coverage by selecting optional coverage or endorsements will increase your premium.

Here are some ways that you can reduce your renters insurance premium:

• Deductible amount
  The standard deductible for Coverage C is $250. Choosing a higher deductible (up to $2500) can reduce your premium substantially. But if you've chosen a higher premium, you will have higher out-of-pocket costs in the event of a loss.

• Multiple-line discount
  Many insurers will offer discounts if they provide your automobile insurance as well as your renters insurance.

• Alarm systems
  Premium credits are often available for burglar alarms, sprinkler systems, fire alarms and smoke detectors.

Authors: Robert Klein and Bruce Palmer
Content provided by the Insurance Information Institute (I.I.I.)


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