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Related topics: insurance, home insurance, renters, frugal, Donna Freedman

Anurag Wahklu meant to get renters insurance. He'd talked with an agent and was waiting for more info. Then his Boston-area apartment building went up in flames, leaving Wahklu, his pregnant wife and his mother-in-law with little more than the clothes on their backs.

Now, he says, "I am a strong advocate for renters insurance."

So is Joie Tamkin, who came home and interrupted a lunch-hour burglary at her Austin, Texas, apartment. The thieves didn't have a chance to get to her jewelry, but they swiped the television and a smart phone. It took six months to save up for replacements.

"You might think you don't have anything of value, (until) it gets stolen from you," Tamkin says.

Cynthia Clampitt lived in a Chicago-area apartment complex where a resident decided to deep-fry a turkey . . . indoors. The resulting blaze torched the unit and did considerable damage to neighboring apartments.

"There are as many reasons to have renters insurance as there are things that can go wrong," she says now.

Image: Donna Freedman

Donna Freedman

If you don't own the place where you live, you need renters insurance.

That includes those of you in rental houses, apartments, dorm rooms and senior living complexes.

Coverage is cheap, generally between $100 and $300 a year depending on where you live and what you're insuring. It takes less than 10 minutes to sign up by phone or online.

Not having renters insurance is the ultimate penny-wise, pound-foolish decision. Think you can't afford it? Well, think about this: How would you pay for temporary lodging and replace all your clothes, dishes, furniture and electronics if your upstairs neighbor fell asleep with a cigarette in his hand?

One-third of us rent

One-third of American households are now renting. That number is likely to rise due to "changing demographics and housing preferences," says the National Multi-Housing Council. The industry group notes that half of all new housing built between now and 2020 will likely be rental units.

The NMHC's annual survey shows that two-thirds of apartment management firms won't rent to you unless you show proof of insurance. That's a 22% increase from the previous year.

Landlords do this for several reasons. Tenants who have coverage won't be financially stressed after a fire or property loss, i.e., they can keep paying their rent on time. A tenant with insurance also is less likely to file a lawsuit to recoup losses, says Eric Narcisco of Effective Coverage, a Manhattan brokerage specializing in renters insurance.

Is Grandma covered?

Nationally recognized insurance lawyer Frank N. Darras notes three underserved populations for renters insurance: college students, the elderly and Americans transitioning from foreclosures to rentals.

His own college-age daughter is covered; he made sure her friends' parents knew about renters insurance, too. "Rental or dorm or sorority, they are subject to vandalism, burglary, theft, electrical surge, fire," says Darras, who practices in Ontario, Calif.

People who have lost homes to foreclosure and seniors who move into apartments may be particularly vulnerable. Both groups probably kept their most valuable possessions when they downsized. Having been homeowners for years, they may not be in the mindset to seek renters insurance.

If you were foreclosed upon, you may still be shocked and grieving. It would be a lot worse if you lost any (or all) of what's left due to a lack of insurance. Do something about this, now.

And hey there, sandwich-generation kids: If your parents are in an apartment or assisted living, find out if they have renters insurance. If they don't, get on the phone with an agent. Certain items - antiques and heirloom jewelry, for example -- may need additional coverage.

Surprising coverage

Renters insurance isn't just for water or fire damage, or even just for problems on the premises. Here are a few successful claims mentioned during interviews:

  • Luggage gets lost by an airline or stolen from a hotel.
  • You accidentally injure someone during a pickup ballgame in the park.
  • Your car gets stolen the day you pick up a bunch of $300 business suits from the dry cleaner.
  • A prolonged power outage ruins a freezer full of food.
  • You are robbed of your cell phone and camera while on vacation.

Clearly you should talk to your agent any time you suffer a loss, no matter how unlikely it seems that you'd be covered. (A freezer full of food . . . who knew?)

Limitations exist on certain items, e.g., a $500 total for jewelry. Talk to the agent about buying additional insurance on particularly valuable items.

Having a place to stay 'saved my world'

Nicole, a New Yorker who asked that her last name not be used, guesstimated how much her belongings were worth and bought insurance to match.

One year later a building fire displaced Nicole from her apartment. Because she had coverage, the freelance PR specialist was able to get a hotel room and keep working, instead of crashing on friends' couches and hunting for Wi-Fi at coffee shops.

"I was able to maintain a level of normalcy," she says. "My renter's insurance saved my world."

This "loss of use" coverage limits out at 20% to 50% of a policy's total value. Those who live in high cost-of-living areas should increase that part of the policy, according to Manhattan-based broker Mark Carrasquillo.

He speaks from experience: His parents were displaced after a fire. "They had to rent an apartment and their policy just barely had enough coverage," says Carrasquillo, of E.G. Bowman.

Make a list, check it twice

Getting renters insurance is relatively easy. Even though it's not always required, the professionals with whom I spoke strongly recommend that you document your property. This can be as simple as taking cell-phone video of each room.

Open every drawer, and scan every shelf in the closet or cupboard. Focus clearly on the serial number of your laptop or the receipt for that new television. Store the video somewhere else, e.g., send a copy of it to your parents or friends. You may also choose to digitize and store receipts online.

The Insurance Information Institute has free inventory software at a site called KnowYourStuff.org.

Some renters still use pen and paper to catalog their belongings, including serial numbers. Your agent may provide an inventory checklist, or you can print out Wells Fargo's property inventory.

A good time to do this is right after the holidays. Not only are you documenting gifts you received, you're getting a clear picture of holiday décor, china, ornaments and the like. (Procrastinators take note: Now you can feel good about not having put all that stuff away.)

Don't forget items stored in the garage, attic, crawl space or bathroom vanity. It's amazing when you add up how much you've invested in wine, tools, craft/hobby supplies (hi there, yarn addicts!) or expensive cosmetics.

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Wells Fargo spokeswoman Melanie Donaghy tells of one woman who discovered she owned about $1,000 worth of hair- and skin-care items -- and don't get her started on the shoe collection.

Imagine replacing all that. Renters insurance, Donaghy says, "is legally optional, but it probably isn't financially optional."

Tips from the pros

Don't put this off. Buy a basic level today, as in right now. Call the company that insures your house and/or car, or search online for a quote.

Over the next couple of weeks make an inventory of your belongings (yet another way that 20 minutes at a time can save you big bucks). Check with an agent and add more coverage if necessary.

Things to consider:

  • Look for discounts. The company that covers your home and/or auto may give you a deal, Carrasquillo says. You might also get a good-student discount, a senior discount or a military discount.
  • Ask the agent if you need an appraisal for particularly valuable items. They may just take your word for it.
  • Got roommates? Get separate policies. You want full coverage on your own stuff, and you don't want to be attached to a roomie who's found liable for damage or injury. "Would you share a car insurance policy with your roommate?" says Eric Narcisco.
  • If your budget is really tight, ask about paying by the month. As with other kinds of financing, this will likely cost you a little more per year. But at least you'll be covered.
  • Just as you store your virtual inventory somewhere else, keep your insurance contact info off-premises, too. Put the agent's name in your cell phone but e-mail the info to yourself (and maybe a relative) in case your cell phone is one of the things that gets stolen or destroyed.
  • Are you the forgetful type? Consider setting up your policy to renew automatically.
  • If your apartment becomes uninhabitable, keep receipts for everything you buy until you get back home. After a wildfire caused Barbara Adolph to flee her northern Los Angeles County rental, the insurance company paid for everything from new toiletries to food for her dogs.
  • Consider "replacement" coverage versus "actual cash value" coverage. That five-year-old couch has depreciated, so the insurance company won't give you what you paid if you have a cash-value policy. Replacement coverage will let you buy a new one that's just as nice.

Save money today

Keeping score: A better credit score means less money paid out for things like interest and insurance. "9 fast fixes for your credit scores" helps you improve that number.

Business expenses: Do you work at home? You might be able to deduct some costs come tax time. "Write off your home office," part of the "Do one thing" series on Bundle, gets you started.

In good hands?: You may think you're getting a good car-insurance deal. But how many of us really know what to ask? "10 things your auto insurer won't say" highlights some ways to tell whether your agent is working in your best interests.

Donna Freedman is a freelance writer in Seattle. You can find more of her writing on MSN Money's Frugal Cool blog and at Surviving and Thriving (motto: "Life is short. But it's also wide.").