Renters Needlessly Risk Crippling Losses; Insurance Is Inexpensive

Only 37% of renters have renters insurance, according to a recent Insurance Information Institute poll. They’re taking a big financial risk. Think about having to replace all of your clothing, furniture, electronics, pots and pans, toiletries, books, and everything else you own. Without insurance, you’d have to pay out-of-pocket to replace all your possessions.

But it costs little to avoid that. A typical renter’s policy goes for around $300 a year in New York City, for example, and somewhat less most other places. It averages out to about $100 for every $10,000 in property coverage.

Many carriers require a minimum coverage limit that can range anywhere from $10,000 to $75,000. You can buy as much coverage as you want, need, and can afford.

Additionally, the policy provides built-in liability coverage, usually $100,000, in case someone gets hurt in your apartment and files a claim or lawsuit against you. However, I always recommend the maximum coverage available, generally $500,000. The extra cost is nominal. Additionally, you typically need $500,000 of basic coverage to qualify for a personal umbrella liability policy, something everyone with substantial assets or earnings should have.

A renter’s policy typically covers your property for losses caused by fire, theft, water damage, windstorms, and vandalism, both in your apartment and elsewhere. But not in New York City, where off-premises theft coverage is excluded, and you have to pay to add the coverage to your policy.

Coverage for certain items, like art, antiques, silverware, and jewelry, is limited, but you can increase coverage for them with a policy endorsement for an additional fee. You’ll need an appraisal in order to get the right amount of insurance for such valuables.

If You’re Forced to Move

A crucial, but often-overlooked benefit is loss of use. If you can’t live in your damaged apartment, the policy will pay your expenses to stay elsewhere, up to the limit indicated. This built-in limit is generally a percentage of the contents limits, ranging from 20% to 40%.

If you have $15,000 of contents coverage you’d have at most $6,000 of coverage. A studio in NYC may cost $1,000 a month (and often much more), so you’d only have six months of coverage at most should you be displaced.

My parents were displaced by a fire. They had a renters policy, with $60,000 in contents coverage and loss of use of $12,000. Fortunately, they were back in their apartment after eight months; any longer and they would have had to pay out of pocket for the rent. Now I advise my clients to increase the limit to allow them at least 12 months of coverage. High-end carriers do not cap this coverage and will pay whatever the cost may be; they refer to it as additional living expenses.

Save by Combining Renters and Car Insurance

If you own a car, it may be in your best interest to secure a renters policy with the same carrier. When you buy renters and auto insurance from the same insurance carrier, you’ll get a multi-policy discount. Insurers discount the auto insurance policy 5% to 15% and also offer a discount on the renters policy.

The savings on auto insurance policy can sometimes offset the cost of the renters policy. In other words, you may still be paying $1,600, but now instead of paying for just an auto policy you’ll have an apartment renter’s policy as well.

While it’s possible to shop online for the best deal on renters’ insurance, most people have an independent insurance broker canvass various insurers. Just make sure your broker gives you an apples-to-apples comparison.

Mark Carrasquillo is an insurance broker with E.G. Bowman Company, an independent insurance agency in Manhattan. Founded in 1953, E.G. Bowman offers all types of commercial and personal insurance. Mark can be reached at mcarrasquillo@egbowman.com