A number of standard coverages are included with most renters insurance policies. This guide will tell you what those standard coverages are, as well as explain what types of endorsements, or “add-ons,” you can make to your renters policy for high-value items, such as expensive jewelry or furs. You can also learn about what to expect when you begin a renters insurance application and some of the lingo associated with renters insurance. Also included are some scenarios to help you better understand the importance of renters insurance and where your coverage comes into play.
Renters Insurance Contracts and Coverages:
There are different kinds of renters insurance contracts, such as the well known industry contract called an HO-4 form. Renters policies are usually “named peril” policies, which means that somewhere in your policy paperwork the covered perils are actually spelled out. These “named perils” are standard across most renters insurance policies. A peril is something that exposes you to risk or harm, such as fire or lightning. If a peril is not listed it means that you probably aren’t covered for it. Some policies offer special add-ons called endorsements to protect you from these additional perils.
As referenced above, one of the better known renters insurance contracts is called the HO-4. Below you’ll find six of the more common covered perils on the HO-4 and some explanations about coverage limits, as well as a few “what if” scenarios to demonstrate how those coverages can help you in the event of a loss.
· Fire or Lightning
· Vandalism or Malicious Mischief
· Accidental Discharge of Water (e.g. a sink overflowing)
You will also be asked to choose a dollar amount for personal property coverage and personal liability coverage.
Personal Property Coverage:
The coverage limits you choose for personal property coverage are meant to cover you in the event that one of the standard perils listed above occurs. Personal property coverage includes coverage for personal items in your home such as clothes, furniture, appliances, linens and even toiletries and cleaning supplies. For example, if you choose $20,000 in personal property coverage, you will have up to $20,000 to replace your property if a named peril occurs.
Remember to account for all your personal property—it is very common to grossly underestimate the value of all your personal property. People often forget about dishes, clothes and flatware and they simply focus on the big ticket items.
When replacing property, retail value is often taken into account, assuming the policy has a replacement cost endorsement, as opposed to actual cash value. A policy with replacement cost replaces the property with something that is of similar kind and quality. A policy with actual cash value replaces the property after taking depreciation into account. For example, if you lose your sofa in a fire, replacement cost coverage is going to look for something similar in kind, quality and cost to the lost property. Actual cash value would take depreciation into account for the lost property, so the longer you have had the sofa, the less money you will get for the claim.
Personal Liability Coverage:
You will also be prompted to choose a dollar amount for personal liability coverage. Personal liability coverage is protection in the event you are found liable for unintentional bodily injury or property damage, occurring on or off of the property, and that is not related to automobiles or business. For example: a slip and fall on the premises, or accidentally injuring someone with a golf ball at the driving range.
You will also be asked to choose a deductible amount, which is the amount of money you pay before your insurance starts paying. Remember that you will need to ensure this amount of money is always available should the need for it arise after filing a claim.
Endorsements and Special Coverages:
When obtaining a renters insurance quote, take note of some of the special options you can choose from. Endorsements are add-ons to your standard renters insurance policy that provide more protection for high-value items and other types of fraud.
- Valuable Items limits. All insurance policies have limits on Jewelry, Furs and other valuable items. Make sure to account for these on your quote and add an endorsement for additional coverage if necessary.
- Identity Fraud/Theft: This endorsement will help you recover your credit status should you fall victim to identity theft.
- Water/Sewer Backup: Imagine the mess of a backed-up sewer pipe or malfunctioning sump pump in your apartment or house. (A sump pump is used to remove water that has accumulated in a sump pit, commonly found in the basement of a home.) This endorsement will help clean up, repair or replace your damaged household items.
- The following scenarios will give you a better idea of when and how your renters insurance comes into play. The scenarios address some of the different coverage options on a renters insurance policy.
- You're out of town on vacation and see a clip on the evening news about a tornado in your county. Sure enough, you get home and the duplex you were renting is in pieces and your things have been thrown all across town. A typical HO-4 policy would provide coverage for your lost and damaged items. Many policies also include "loss of use" coverage that would help with additional living expenses such as your hotel bills while you looked for a new place.
- You live in a huge, multi-building complex. Even if something happens to the building and you lose all your stuff, the landlord's policy will help replace it for you, right? Unfortunately, this isn't usually the case. A landlord's policy is typically just going to cover the cost to physically rebuild the unit and they may or may not help you with a temporary place to stay depending on the terms of your lease. You could easily find yourself in this position if your water heater or the pipes in the wall were to burst.
- A neighbor stops by to borrow some milk and slips on your freshly polished hardwood floor. You apologize and ensure that your neighbor is ok, but then receive a letter from an attorney a few weeks later accusing you of negligence for not having warned the neighbor of the slippery floor. While you disagree with the accusation, it seems as though you are going to court anyway. Having renters insurance covers this type of liability and prevents you from having to pay out of your own pocket if you are sued.
- You may be safety conscious, but your neighbors may not. While you take the necessary measures to keep your apartment safe, your neighbor may leave the stove unattended, smoke in bed or leave the iron on. If your neighbor's wrong-doing falls under one of the named perils on your policy, you would be covered for any damage to your belongings should your at-fault neighbor not have insurance. For example, if the fire that started in their apartment creeps into your apartment and damages your belongings, your insurance would cover the damage to your apartment and belongings, assuming a fire is a named peril on your policy.
- Please note: The above is meant as general information and as general policy descriptions to help you understand the different types of coverages. These descriptions do not refer to any specific contract of insurance and they do not modify any definitions expressly stated in any contracts of insurance. Renters policies are written by non-affiliated insurers through GEICO Insurance Agency, Inc. Some discounts, coverages, payment plans and features are not available in all states or in all GEICO companies. See geico.com for more details. Government Employees Insurance Co-GEICO General Insurance Co-GEICO Indemnity Co-GEICO Casualty Co GEICO: Washington DC 20076. (C) 2009 GEICO