Do You Need a Renters Insurance Policy?

Do you rent your home or apartment, or have family members who rent? If so, do you/they have a renters insurance policy in place? Many renters don’t think about a renters policy, but it is important. While you don’t own the property where you live, you own the property inside. If there was a fire or flood - or if your home were burgled - a renter's insurance policy can help cover the costs of replacing clothes, computers, and other valuables. The value of liability coverage cannot be underestimated. If a visitor or repair person injures themselves, you could face a personal lawsuit. A policy can also reimburse you for living expenses if your rental property becomes uninhabitable.

A renters policy, known as tenants insurance, is an HO-4 policy. Standard coverage includes:

· Personal property

· Loss of use

· Liability

· Medical payments to others

Similar to homeowners insurance, it is designed for people who don't own their own place. It is less expensive than homeowners insurance because it only covers property INSIDE your home, not the structure. Similar to other property/casualty insurance, renters insurance has deductibles and coverage limits that determine the cost of the policy and the reimbursement amounts. Before deciding which policy is best, take an inventory of your belongings and how much they cost. When you determine the value of your items, think about whether you need replacement coverage or actual cost coverage. Replacement coverage will replace items at full cost; actual cost covers reduce the value of items due to age and depreciation.

Some renters need more coverage for personal property if they own high-end furniture, expensive technology, designer clothes, etc. Standard personal property coverage may not be enough to replace them. Coverage with higher personal property limits is usually inexpensive; amounts range between $15,000 up to $500,000. Consider adding an insurance rider if you own pets or are worried about identity theft. You can obtain special endorsements for more valuable items such as jewelry, watches, furs, firearms, gold, coins, silverware, antiques, electronics, watercraft, and trailers. Certain coverage (e.g., jewelry) will required a professional appraisal.

If you work from home, consider adding a stand-alone business insurance policy. This offers higher coverage limits for business equipment than a standard renters policy. It also provides liability coverage, which is important if your business has visitors coming into your home.

It is also important to know what is NOT covered by renters insurance. Exclusions include:

· Flood damage which comes from the outside: Some renters can buy coverage from FEMA to cover these damages In the case of a Presidentially declared disaster, renters are eligible for temporary housing assistance and Critical Needs Assistance (CNA), a one-time payment that can help pay for life-saving and life-sustaining items such as prescriptions, food and diapers.

· Earthquake damage: may be available as an add-on coverage, or you may need to buy a separate earthquake policy.

· Bed bugs, pests, and rodents: not covered with few exceptions since they are considered maintenance issues by the landlord.

· Car theft or damage: requires a separate auto insurance policy with comprehensive coverage. However, belongings inside your car at the time of the theft are covered by renters insurance.

· Roommate’s belongings: not covered unless specifically listed on the policy.

Finally, do you have a child living on or off campus in college? Most colleges and universities are not responsible for damage or theft of personal belongings, including electronics, clothing, and bicycles owned by students. College students may need renters insurance if their parents’ homeowners insurance does not extend to their college student’s belongings at school, or they live in an apartment where the landlord requires renters insurance.

If you are not currently working with FPS, we would be happy to talk with you. Questions? We are here to help.

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Best regards,

Janet Rhodes Friedman, CFP®, CDFA®, MBA

Janet@PlanWithFPS.com

617-630-4978

Financial Planning Solutions, LLC (FPS) is a Registered Investment Advisor. Financial Planning Solutions, LLC (FPS) provides this blog for informational and educational purposes only. Nothing in this blog should be considered investment, tax, or legal advice. FPS only renders personalized advice to each client. Information herein includes opinions and source information that is believed to be reliable. However, such information may not be independently verified by FPS. Please see important disclosures link at the bottom of this page.