Q. I am looking for a place to rent and a number of landlords are requiring renter’s insurance.
I don’t want to be told that I have to purchase insurance… it should be my choice. I really do not have much and I don’t feel like it is my potential landlord’s business how I handle my affairs. Are they allowed to require this of me?
A. I understand that by nature we hate to be told what to do; however, in this case obtaining renter’s insurance is a positive step and the landlord has every right to require it as a condition of their lease. There is no law or rule that would prohibit a landlord from requiring a tenant to have insurance. In fact, the landlord will probably insist that they be named as a “certificate holder” on the policy. This way the insurance company sends them proof of the policy and any cancellation that may occur. A renter’s insurance policy is called a Homeowners 4 in the insurance world. It covers not only your personal property but also includes personal liability and loss of use of your rental unit.
Even if you don’t have much, add up the value of all your clothes, shoes, your TV, other electronics, pots and pans, everything…what if you came home from work one day and it was ALL gone in a fire?
How much would it cost you to replace it and start over from absolutely nothing? The value would probably be more than you may think. In a scenario like that, the owner’s insurance would not cover any of your belongings. He doesn’t own your belongings so they are not insured by him. There are two types of property insurance: Replacement Cost and Actual Cash Value.
Replacement is the way to go in my personal opinion. Replacement Cost is as it sounds, it replaces what you have at today’s price. Actual Cash Value pays you the worth of the item after depreciation. Replacement Cost is a little more expensive but renter’s insurance is so inexpensive to begin with that there isn’t much of a price difference.
The liability portion covers you if someone gets injured on the property. For example, they accidentally fall over your bicycle and break their arm and then sue you for medical fees and loss of wages. Do you have the cash to pay them? The liability portion also covers your family and pets (as long as you let the insurance company know you have a pet in advance and it agrees). What if you, your child, or your pet hurts someone (other than in a car accident)? They can sue you and get a judgment against your future earnings for years to come! You do have something of huge value now, you have your future.
Loss of use helps you when you have to move out because of a fire, large water leak, or smoke damage to your unit when a neighbor has a fire. Your renter’s insurance will pay all or part of making sure you have a place to go and live. What if you accidentally caused the fire and are deemed responsible. Do you personally have the money to cover the cost of the damages to the owner’s home?
What if someone breaks into your home and steals or damages your belongings? What if we have a large power surge and your TV and computer break? Renter’s insurance does more than you may think. As with car insurance there is a deductible, an amount that you pay first before the insurance company begins paying. Premiums are based on the amount of coverage you need and your deductible, type of dwelling, etc. It is a very good idea to take pictures or videos of your belongings and keep receipts…but store them somewhere other than your home. That way in case of a catastrophe, you will actually have a record of your valued personal possessions.
I am not an insurance agent, but, as a Property Manager, I have a working knowledge of insurance. PLEASE fully discuss these items with the agent you plan to purchase your renter’s policy from and rely on what they tell you.