6 myths about renters insurance
You might rent your home, but chances are you own the expensive stuff inside it. Here's why you need renters insurance.
This post comes from Michael Koretzky at partner site Money Talks News.
Wildfires in Arizona and Nevada, flooding along the Missouri River, and hurricane season to boot. In times like these, homeowners fret about the insurance on their most expensive possession.
And renters? They shouldn't be smug. Or uninsured. A natural disaster -- or even a kitchen fire or broken pipe in an adjacent apartment -- can wipe out everything they own too. That's why there's renters insurance. And in most circumstances, you should get it.
More than 81 million Americans rent -- and, according to this survey done several years ago, 50 million of them don't have renters insurance. Why? Maybe they believe one of these myths:
That's a fraction of what homeowners pay. According to website HomeInsurance.com, the average annual cost of homeowners coverage in the U.S. is $727. (You can see an interactive map with the average cost in each state here.)
Why the difference? Because homeowners are insuring the cost of the building, while renters are just insuring the cost of the stuff inside. "(Renters) are not responsible for the building in which they live, but they are most certainly responsible for their own belongings," explains the Renter's Insurance Online Guide.
And you can lower the low cost of renters insurance if you get it through the same company providing your car insurance. State Farm says, "You could be eligible for premium discounts on both policies." So it's worth a call to your agent. Post continues after video.
My landlord has insurance, so I don't need it. While your landlord probably has insurance to cover the building, your possessions aren't the landlord's problem and aren't covered by the landlord's policy. (Should you rent or buy? Try MSN Money's calculator.)
A renter's policy (generally known as an HO-4 policy) typically provides policyholders with a fixed amount for all your possessions and provides coverage for specific "perils" such as: fire or lightning, windstorm or hail, explosion, riot or civil commotion, aircraft, vehicles, smoke, vandalism or malicious mischief, theft, damage by glass or safety-glazing material that is part of a building, volcanic eruption, falling objects, weight of ice, snow, or sleet, water-related damage from home utilities, and electrical surge damage.
And if some of those events don't seem likely (volcanic eruption comes to mind), here's one that is: burglary. The U.S. Department of Justice says there were 2.19 million of them in 2009, and "victims of burglary offenses suffered an estimated $4.6 billion in lost property. . . . The average dollar loss per burglary offense was $2,096."
- Taking some off the top. The more risk you're willing to assume, the less your policy will cost. Choosing a $500 deductible over a $250 deductible can save 10% to 12%, and a $1,000 deductible can save even more.
- Abbreviating the options. AVC stands for actual value coverage. That means you get paid for the depreciated value of the loss. For instance, that laptop you bought for $1,000 might be worth $500 now, and that's all you're going to get for it. RVC stands for replacement value coverage -- you'll get enough money to buy a new laptop just like it. "Replacement cost insurance normally costs about 25% more than the actual cash value policy," RentersInsurance.net says, "but if you can afford it, it's worth the larger payment."
- Location, location, location. If you live in a high-crime area, expect your premiums to be higher. But you can still save if you install a home alarm or add a deadbolt to the front door. Ask your carrier what discounts they offer.
- Membership has its privileges. Some insurers will offer you discounts for being a member of a credit union, AAA, or other organization, so be sure to ask.
- Give up smoking. Many accidental fires are caused by smoking. Some companies offer discounts if you've kicked the habit or never started.
- Come highly rated. Many insurance companies check your credit rating. The lower your score, the higher your premiums. (Estimate your credit score for free.)
- Shop around. The Internet has created a veritable flood of competition for virtually everything we shop for, and insurance is no exception. (Compare renters insurance rates.)
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