Renter's insurance policy worth considering

Your Money

May 27, 2007|By Tami Luhby | Tami Luhby,Newsday

For Benny Feldman, peace of mind is worth $32 a month.

That's how much the father of four pays for renter's insurance from Allstate Insurance Co. for $100,000 of coverage for his family's Flushing, N.Y., apartment. He made sure he took out a policy when he moved there nearly nine years ago, though he said he doesn't "have anything worth anything" other than his wife's engagement ring.

"I've heard too many horror stories about people who didn't have it and wished they did," said Feldman, an accountant.

Most people who rent apartments, particularly younger people, don't obtain insurance to cover their belongings. Nearly two-thirds of the 81 million renters in the United States said they don't have a policy, according to a survey last year by the Independent Insurance Agents & Brokers of America.

This could prove to be a costly mistake if your property is damaged, destroyed or stolen.

When weighing whether you can afford it, consider whether you have enough spare cash to replace your things if they are destroyed or stolen. Do you have someplace to live if your apartment becomes uninhabitable? Can you afford to pay for your downstairs neighbor's repairs if you let your tub overflow?

Renters often have many misconceptions about renter's insurance. They include:

The landlord's insurance will protect them.

Not true. The landlord's policy covers the structure but not a resident's personal belongings.

Their belongings aren't worth much.

These days, replacing electronics alone can cost thousands of dollars. Add to that the cost of obtaining new furniture, clothes and kitchen items, and you're potentially talking big money.

Coverage is expensive.

The average policy price is $12 per month for about $30,000 of property coverage, according to the insurance trade association, based in Alexandria, Va.

Renter's insurance has a variety of features. It covers both damage to property and liability. The former protects you in case of fire or theft, including the loss of property you keep in off-site storage or in your car. The latter protects you in case your dog bites someone, your leaky tub damages a neighbor's apartment or a worker slips and falls in your apartment.

In addition, many policies partly cover the cost of temporary housing if your place becomes uninhabitable.

One important decision is whether to get a cash-value or the costlier replacement-value policy. Tim Wagner, Nebraska's director of insurance, advocates signing up for replacement value, where the insurer will pay the amount it costs to buy the item again, not simply write you a check for its value at time of loss.

It pays to shop around for a policy, experts said. Start with your auto insurer, said Madelyn Flannagan, vice president of education and research at the insurance trade association. You might receive a discount for having two policies with the same company.

Tami Luhby writes for Newsday on Long Island.

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