Why You Need Renter's Insurance

Think you don't need renter's insurance? This grad student thought so too until a fire broke out in her apartment.

I'll never forget the phone call. I was sitting in class when my friend Javier called. "I just rode my bike past your apartment, and I think you should get over here. There are three fire trucks parked in front of your house."

That's all he could tell me. I wasn't too worried at this point - I lived with three other women in a rather dilapidated house that was subdivided into several student apartments. It couldn't possibly be our place. Right?

Wrong. When we arrived on the scene, one of the firefighters combed through the crowd, calling my roommate and I by name. Apparently, the fire had started in our room - and there was nothing left but charcoal and ashes.

Luck is No Substitute for Planning

Once I got over the initial shock, I panicked. I had never even thought about renter's insurance. How would I ever pay to replace all of my worldly belongings?

Luckily, unbeknownst to me, I was covered under my parent's homeowner's policy (most standard policies cover full-time students who are under 24 years old and living on campus). The policy paid to replace almost all of my things - not a bad deal, since I was able to replace my standard grad school jeans and sweatshirt ensembles with work suits for my new job. But there were some items that were irreplaceable - like my college photo album, love letters, poems and handknit sweaters my mom had made.

Things to Consider

So before you swear off renter's insurance with a casual "It couldn't happen to me," here are a few things to consider:

  • You're not covered under your landlord's policy. If you're moving into a new apartment, the first thing you should do is get renter's insurance. Your landlord may have insurance on the building, but not on the stuff inside. You're responsible for insuring your own belongings against things like fire, theft and water damage.
  • Be sure your renter's insurance also includes personal liability coverage. Most renter's policies also insure you against all non-auto accidents. So if someone injures themselves in your home, or you knock someone out in a softball game and they decide to sue you, you'll be protected against lawsuits. Unsure of how much you need? Coverage of $300,000 is standard.
  • It's not as expensive as you think. According to the National Association of Insurance Commissioners, the average policy only costs $169 per year. That's a lot cheaper than paying to replace all of your things at one time.
  • Get a replacement-cost policy. There are two basic types of policies. An actual-cash-value policy will reimburse you only for the depreciated value of your belongings. Which, in many cases, is not much. You're better off going for a replacement-cost policy, which will replace your things at current prices. You'll only pay about 15%-20% more for a replacement-cost policy, so shell out the extra $20.
  • Document your belongings. When you're unpacking your things in your new pad, take the opportunity to put together a general list of what you own. (Trust me, this is a difficult thing to do after the fact. You own a lot more stuff than you realize, and it's hard to remember all of it in the aftermath of a fire). You may even want to take pictures of more valuable belongings, like jewelry and electronics.
  • Insure expensive items separately. Most policies place a limit on reimbursements for any single item. So if you own a computer or expensive jewelry, let your insurance agent know - she will be able to tell you if you need to take out any additional riders.
  • Look for ways to lower your premiums. There are a few things you can do to lower your premium. Ask your agent about any discounts - some insurers sell combined renter's/auto policies at a savings. Install deadbolts and smoke detectors. Keep particularly valuable or sentimental items, like jewelry or childhood mementos, in a safe-deposit box - you'll save money while protecting the things that are the most difficult to replace.

We still don't know what caused the fire - theories ranged from faulty wiring to an overloaded circuit protector. But I do know that first thing I do when I move into a new place is purchase renter's insurance. It's a cheap and easy way to keep an unfortunate situation from turning into a tragedy.


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