Renters face the same risks as homeowners. In cases of disaster, such as a fire, storm or earthquake, renters insurance can protect your belongings. That’s a given that’s easily understood.
However, renters’ insurance offers much more than those basic protections. Policies will cover theft of personal property and the costs of a hotel during times when the rental is uninhabitable. It can even cover items lost while traveling.
A landlord or condominium association may have insurance, but it only protects the building, not the renter’s personal items inside.
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An average renter’s possessions are worth more than $20,000, and renters’ insurance policies can cost as little as $10 per month. By keeping an active insurance policy, renters can save thousands in claims and insurance-rate hikes should an accident happen in their rental home.
Somewhat surprisingly, according to a 2012 Insurance Information Institute poll, only 31 percent of renters keep a renters’ insurance policy. This is despite an average policy cost of only $185 per year as of 2010, the institute reports.
Most renters’ insurance policies also offer liability coverage. Landlords who require this coverage will typically dictate within the lease how much is needed. Liability coverage can help protect renters if they are sued due to an accident that occurred on the property they rent.
Liability policies also cover the actions of renters’ pets, unintentional acts by the insured or qualified family members, reasonable medical payments for those injured on the premises regardless of liability, emergency first aid for others, loss of wages and damage to the property of others.
There are two types of policies available to renters looking for insurance: an actual cash value (ACV) policy and a replacement-value policy.
An ACV policy will only pay out the value of the items at the time they were damaged or stolen. A replacement-value policy — the more expensive option at about a 10 percent premium over ACV — is typically the preferred policy because the additional cost is essentially offset by the financial protection it provides when belongings need to be entirely replaced. Consumer products typically depreciate quickly, and a replacement-value policy will ensure a renter isn’t paid out in pennies on the dollar for expensive-to-replace items.
Renters should pay particular attention to any renters’ insurance requirements dictated by their lease agreement. More landlords are requiring renters to carry liability policies because they can serve as the primary insurance coverage in a potential claim. The landlord’s policy would have to pay if there was no other coverage available.
To ensure compensation for any belongings lost due to a fire, storm or other catastrophe, renters should inventory all of their personal belongings. List each item, its value and serial number. Photograph or videotape each room, including closets, open drawers, storage buildings and the garage. Receipts for major purchases should be kept in a fireproof place.
Insurance companies often offer discounts on renters’ insurance for customers who have another policy with the company, such as for a car or business. Additional discounts may be available if a renter has a security system, uses smoke detectors, uses deadbolt locks, has good credit, has multiple policies, has stayed with the same insurer for a period of time, or is over age 55.
Sean Martin is the director of external affairs of the Rental Housing Association of Puget Sound, a not-for-profit association of more than 5,000 landlord members statewide. Rental Resource is the organization’s biweekly column. For more information for landlords or tenants, visit rhawa.org.