Renters need insurance – but few have it

NEW YORK – Sept. 26, 2014 – The number of renters has grown dramatically, yet few renters actually purchase insurance, according to the Insurance Information Institute (I.I.I.)

While 95 percent of homeowners insure their property, only 37 percent of renters have renters insurance, according to a 2014 I.I.I. poll conducted by ORC International.

"Renters insurance provides a very important financial safety net when there is a disaster," says Jeanne M. Salvatore, senior vice president and chief communications officer for the I.I.I. "And, renters insurance is relatively inexpensive – the average cost of a renter's policy is only $187 per year, or less than four dollars per week.

"Many renters are under the misperception that their landlord's insurance policy will reimburse them if their personal property is damaged or destroyed, but that's just not the case," says Salvatore.

Policies available to renters

Renters/tenants insurance

Renters insurance provides financial protection against damage to or loss of personal possessions due to hurricanes, fire, lightning, theft, explosion and other disasters listed in the policy. There is even coverage for water damage caused by burst pipes or a neighbor who forgets to shut off the water in the tub.

Coverage is available on either an actual cash value basis (depreciated value) or replacement cost (no deduction for depreciation). Renters insurance does not cover flooding and earthquake, but separate policies can be purchased for those events.

Renters insurance also provides coverage for additional living expenses if unable to live in a home due to an insured disaster. It also includes liability insurance if an accidental injury occurs and the renter is sued.

Flood insurance

Flood insurance is available through the National Flood Insurance Program (NFIP) and a few private insurance companies. It covers personal possessions on an actual cash value basis, generally up to about $100,000. More information is available at www.floodsmart.gov.

Earthquake coverage

While unlikely in Florida, renters can also purchase insurance for damage to their personal possessions due to earthquakes. Coverage is available either in the form of an endorsement or as a separate policy.

Umbrella liability

An umbrella liability policy can be a cost-effective option, kicking in when the limit on renters insurance has been reached. It also provides coverage for libel and slander. Umbrella policies generally cost about $150 to $300 per year and will also provide additional liability protection if you own a car, boat and even snowmobile.

Because a personal umbrella policy goes into effect after the underlying coverage is exhausted, most insurers will require specific underlying limits on policies.

Floater or endorsement for expensive items

Sometimes expensive jewelry, collectibles, musical instruments or even high-end sports equipment would be covered by a floater or endorsement to a renters policy. This provides broader coverage for risks such as "mysterious disappearance."