Protect Your Assets: Renters Insurance

VOLUME II

By Laurie Diane Leonard

If you are a new landlord or tenant, you may have never heard of renters insurance. However, it is becoming a requirement for your tenants to obtain it. The reasons range from concern for protecting your property from the “party girl” (or guy) who dents the wall or destroys the carpeting to a range of other potential perils—whether manmade or natural—such as fires and floods.

A renters policy covers medical and legal bills (if someone is injured), accidental water damage and the personal items of the people on the policy.

According to Mike Diaz, an Allstate Insurance agent in Spring, Texas, “A renters policy is necessary to have because the tenant doesn’t have liability as far as the structure. He or she does not own it.” A renters policy will cover liability such as “if they have friends or family over, someone gets injured and [perhaps there are] lawsuits. Most apartment community managers will pay for charges upfront and then demand money from the tenant.”

Depending on the landlord (or location), tenants may even see that renters insurance is mandatory in order to lease a unit.

“They can’t get their keys unless they have it,” said Grant Moseley, San Diego, California-based director of insurance with Utopia Management.

The going rate on policies near him are approximately $16 per month. Such policies typically will offer a few hundred thousand dollars’ worth of liability coverage, depending on where and from whom the tenant obtains the insurance. A cursory analysis of U.S. policies shows that terms vary by state, so tenants should check with their local ordinance, prospective landlord or property manager.

According to Moseley, a renters policy adds an “extra layer of security,” bolstering the liability policy all property management companies or landlords take out on tenants. On the other hand, in Texas, Diaz said that property managers are not allowed to legally add their names. As a workaround, the property management company is listed as an “interested party, like a lienholder on an auto.” The effect appears to be the same; Moseley calls the property manager or landlord the “additional insured.”

What’s Covered On a Renters Insurance Policy?

The following items are usually covered on a renters insurance policy and always vary greatly depending upon individual policies*:

Personal Property

This varies. For example, electronic appliances might be covered if there is a fire (or a “peril” as defined above). Typical coverage might be around $20K or more if there are high-ticket items (ex. jewelry with diamonds).

Loss of Use

If anything makes the home uninhabitable (like a fire) and the tenant must leave or even flee. For example, to a hotel room while damage is repaired—the policy may cover up to about $5K or $6K in losses.

Personal Liability

If the tenant destroys something on the property, it is not the landlord or property manager’s fault. An average amount may be up to $300K.

Medical Payments

Maybe $1K will be allotted to any injuries or accidents that may occur if, say, a friend or family member comes over and requires medical attention. This portion of the policy is designed to cover those third-party mishaps, but always check with your insurer.

Mold/Fungi

One renter in Milford, Connecticut rented a house without a lease or any protection. Not surprisingly, when something happened, she was not protected. As a result, the place was teeming with mold. Tenants should bake this into their policy.

“If claims are the responsibility of the tenant, then the property owner and property manager are protected,” said Moseley.

The practices for both him and Diaz apply to all types of renters—from apartments to condos to houses. Moseley reckons that the rise in popularity of these policies may have been fueled by insurance companies, but nevertheless the trend is here to stay.

And this means more dollars in everyone’s pockets, whether they are the renter, the landlord or property manager. With more benefits and better coverage, all parties may feel more secure in the event of an emergency.

*Source: Renters Insurance 10