Landlord Insurance Policies Do Not Cover Tenants
What Renters Should Look for When Purchasing Insurance
Nov 7, 2009
Whether a tenant is renting a small one-bedroom apartment or a full multi-story home, it is important to think about how much is at stake if there were an event, such as fire, that caused a total loss. The owner of the building or landlord would be fully reimbursed because she has a homeowners or landlords insurance policy protecting her interests. The owner's policy covers the owner's interest only, not the tenant's.
Unless a tenant has nothing to lose in the event of a total loss, purchasing a renter's insurance policy is highly recommended. Tenant insurance policies not only cover the loss of personal property, but it also protects the tenant from liability claims that arise as a result of an occurrence on the property itself such as a trip and fall.
Things to Consider When Shopping for Renters Insurance
As with the traditional homeowner's insurance policy, renters have options when it comes to purchasing coverage. The two most important options to consider are the perils insured and the valuation clause.
Insurance Policy Perils Insured
Insurance policies can be written on a named peril or all risk basis. Named peril policies are less expensive because the insurance company will only pay if a loss occurs as a result of a peril named on the policy. The basic named perils include, fire, lightening, windstorm/hail, explosion, riot (or civil commotion), aircraft, vehicles, smoke, V&MM (vandalism and malicious mischief), theft and volcanic eruption. Although the perils sound all encompassing, it's more limiting than all risk coverage.
All risk coverage means the insurance company will respond if a loss is caused by any peril except for those excluded in the policy form. Therefore, damage caused because little Tommy clogged the kitchen sink causing the water to overflow into the living room causing irreparable damage to the 5 year old couch, loveseat and ottoman set would be covered under an all risk policy (Tommy flooding an apartment is not a named peril and would be excluded under a named peril policy).
Renter's Insurance Valuation Clause
Another aspect to consider when purchasing a renters insurance policy is the valuation clause. The valuation clause is how the insurance company determines how much to pay for property damage. The two methods most commonly used are replacement cost and actual cash value.
Let's take the 5 year old damaged living room set for example. If the policy were written on a replacement cost valuation, the insurance company would pay the amount it costs to replace the three piece set with one of "like kind and quality." However, with a policy written on an actual cash value basis, the insurance company would have to take the age of the living room set into consideration, deduct depreciation and issue a check for the depreciated value.
While the premium charged for an all risk, replacement cost policy is higher than that for a named peril, actual cash value policy, it is up to the tenant to decide if the additional premium is worth it.
Premium Savings - Multi-Line Discount
Renters with automobile insurance would receive a multi-line premium discount by placing the tenant insurance policy with the same carrier that writes the auto policy. However, if that's not an option, it's best to obtain at least three quotes before selecting an insurance company.
Related Reading:
Mobile Home Insurance: This article provides tips for individuals looking to insure their mobile home.
Dogs and Homeowners Insurance: Whether looking for homeowners or renters insurance, dogs do have an affect on insurance premiums. Dog owners should review this article before shopping for insurance.
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