Thanks joining us, Andrew. Why should renters get renter’s insurance?
The two main reasons that tenants should obtain renter’s insurance are to protect their personal possessions (property insurance) and to protect themselves against property damage or bodily injury that they may cause to others (personal liability insurance). Furniture, clothing, electronics, and other valuables are assets that most tenants cannot afford to replace if they are damaged or stolen.
Similarly, many tenants are unaware of the financial risk they face if they are found liable for causing damage to their neighbors’ property. We recently managed a claim for a tenant who accidentally left their water running and flooded their own apartment as well as two of their neighbors below. Thankfully, the tenant carried personal property insurance to replace their own damaged belongings, as well as personal liability insurance to pay for the $98,000 in damage they caused.
What is typically covered?
Typical renter’s insurance policies will provide between $25,000-$75,000 worth of personal property, and $500,000 of personal liability coverage. The most common causes of loss to personal property are fire, theft, and water damage. As a renter, personal liability insurance is needed mainly for the risk of damage to other tenants’ property and/or damage to the building itself. As with all insurance policies, coverages are customized for the needs of each particular client.
Do renters need insurance it their landlord already has it?
All renters need to understand that any insurance carried by the landlord most likely will not protect the possessions of tenants. In rare circumstances, the nature of a loss to the building may hold the landlord financially responsible for replacing tenants’ damaged property. Otherwise, per the terms of most lease agreements, tenants are completely on their own if anything happens to their belongings, or if they cause damage to others.
Can a renter share the insurance with their roommates?
Tenants should never assume that their insurance policy can be shared. A typical renter’s insurance policy defines who is covered as the named insured (the tenant name on the policy), and relatives of the named insured. As such, the policy language does not accommodate unrelated roommates. For example, renter’s insurance policies have one limit for personal property- if there is a fire and multiple roommates are attempting to divide up this coverage amount, the claim can become very messy (which is one reason why many insurance companies do not allow policies to be shared by roommates).
I would recommend that tenants check with their insurance company for any flexibility on this point before making improper assumptions. Thankfully, renter’s insurance policies are extremely inexpensive, so risking a coverage denial would not be worth the minimal savings that may be found by trying to “split” a policy.
Do you recommend landlords make renter’s insurance a requirement of the lease?
Absolutely- we strongly encourage all of our landlord clients to not only require their tenants to procure renter’s insurance, but also to increase their ability to enforce this requirement since it is in everyone’s best interest. Renter’s insurance is a typical requirement of most tenant leases today. We explain to landlords that they are just as likely to have damage to their building by “regular” perils such as fire, lightning, storm, etc. as they are to suffer a large loss due to the negligence of a tenant. Today there are many easy-to-use programs for landlords to provide renter’s insurance policies to their new and existing tenants (and track compliance throughout the building).
What key factors should renters pay attention to so they get the right amount of coverage without overpaying?
The main cost driver for renters insurance is the amount of personal property insurance that a tenant selects. For this reason, we urge tenants to take a mental walk around their unit and add up their major belongings, clothes, electronics, etc. and arrive at a sufficient dollar amount of insurance to protect themselves. Again, because the cost is minimal to increase this limit, it is never worth being underinsured.
For personal liability insurance, we never recommend anything less than a $500,000 limit (as obtaining this increased limit equates to only a few dollars per month). Tenants should also tell their insurance company about any specialty items such as jewelry, fine arts, or other collectibles (as most policies often limit or exclude these items from the regular personal property coverage limit).
We highly recommend that each tenant consults with a licensed agent in order to determine their coverage needs, and ensure they understand the value of the policy they are purchasing.
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Andrew Howard is Vice President of Howard Insurance Agency, a third-generation property and casualty insurance agency serving companies, families and individuals located in the Washington, DC region and abroad for over sixty years.
Read last newsletter’s interview on DC real estate in 2011 with Grant Montgomery of Delta Associates.
