Renting an apartment or house poses no fewer risks than owning a residence. The loss of your possessions due to a fire or other insurable event is a tragedy. However, losing possessions that have not been protected by a renters insurance policy is a disaster that could be prevented.
Insurance is a complex issue. Nonetheless, it is critical for the insured to be well informed regarding the particular components of the renters insurance policy prior to contracting for the coverage. This document will help explain the basic elements of such a policy.
Policies
Each type of policy has a different level of coverage. Two standard forms are the Broad Form (HO-BT) and the Comprehensive Form (HO-CT).
HO-BT Policy. This policy insures property against the losses that are identified in the policy. Losses that are not specified in the policy are not covered.
HO-CT Policy. This policy is termed an ‘all-risk’ policy in that property is insured against all types of loss unless the type of loss is specifically excluded in the policy.
Each renters policy will state a total dollar limit which is the maximum amount that will be paid to the insured regardless of the actual amount of the claim. In most instances, the policy will include a deductible amount equal to a percentage of the total amount of coverage. This deductible is the amount the insured must pay before the insurance company will pay the claim.
Coverages
Personal Property
This coverage pays for the repair or replacement of the contents of your home as well as other personal belongings that are owned by the insured or family members living in the home of the insured. Coverage is limited to an amount specified by the insured and the insurance company. The coverage is limited related to particular types of property that are especially susceptible to loss such as money, securities, and jewelry. These items can be addressed in a separate schedule and by an additional amount of insurance.
Loss of Use
This coverage provides additional living expenses if the home becomes uninhabitable due to a peril addressed in the policy. These expenses include housing, meals, and warehouse storage. The amount paid is the amount above and beyond the normal living expenses. In most instances, Coverage D is limited to 20% of Coverage C. Exclusions, conditions, and specific language are found in the policy.
Personal Liability
This coverage insures against a claim for bodily injury or property damage that arises due to an injury to others and/or damage to their property for which the insured is responsible. Both a defense and damages are paid.In most instances, the personal liability coverage is in the amount of $25,000 plus legal costs.
Medical Payments to Others
This coverage pays the reasonable and necessary medical expenses related to the injury of a non-insured person on the property.
Endorsements. Endorsements provide additional coverage beyond the standard policy for additional fees. Examples of common endorsements include coverage for jewelry, fine arts, camera equipment and computer equipment.
Exceptions. Exceptions to coverages provided by the policy are stated in the policy.
Actual Cash Value versus Replacement Cost Coverage
In most instances, the renters policy will pay the actual cash value of property. As a result, the insurance company will deduct an amount for depreciation from the property’s value prior to paying the claim. For an additional premium, replacement cost coverage can be obtained that pays the full cost of replacing your property less the deductible. In both instances the amount paid is limited by the policy’s dollar limit.
Perils Insured Against
The perils addressed by the policy include: Fire or lightening; windstorm or hail; explosion; riot; aircraft or vehicles; smoke, vandalism, theft.