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August 19, 2011

Not Owned, Not Covered, Not Good!

3 min read

Topic: Insurance Agency Management Insurance Agency Growth Strategies

As the fall approaches across the United States, millions of young people will embark on that great journey we call life on a college campus. Others entering their golden years and their families will consider the benefit of moving into an assisted living facility. Still others, uninterested in or unable to secure a home loan, will choose to move into an apartment or rental home.

What does each of the above circumstances have in common?

None of them own the home in which they are living—thus preventing them from purchasing a standard home insurance policy.

Yes, those individuals described above could find coverage for personal property or personal liability claims under the home insurance policy of someone else. For example, some policies will extend coverage to a student while living away attending school. However, reliance on someone else’s insurance is risky—coverage may be inadequate or nonexistent, depending on the terms of that policy.    

If you’re one of the individuals described above—or feel responsible for someone that fits the description—wouldn’t you feel better knowing insurance coverage is in force?

Renters Insurance
Renters insurance is a generally used term to describe a policy designed for someone that does not own a home. Insurance carriers that sell renters insurance typically have their own rules to determine who is eligible. Many policies will offer both personal property (often called “contents”) and personal liability insurance.

Personal Property
Renters insurance is often marketed and sold for its ability to cover personal property. Many carriers focus on this function of the policy for psychological reasons. Why? It’s much easier for buyers to visualize the theft of or damage to personal property than it is to visualize a personal liability claim. 

You can buy renters insurance at a limit sufficient to pay the cost to repair or replace damaged or stolen property. Some insurers allow buyers to choose to purchase coverage that will reimburse the cost to replace damaged property with a newer model—without deducting for depreciation. Others only allow buyers to buy insurance that will pay the actual cash value of the property, allowing the claims adjuster to deduct for depreciation. If available, the former option is preferable—many types of personal property, such as electronics and furniture, depreciate significantly.

Renters insurance may be sold on a “named” or “open” perils basis:
• If the former option applies, coverage is limited to causes of loss or so-called “perils” specifically named in the policy. Let’s say your TV burns in a fire. It likely will be covered because fire is a named peril. If the event causing damage to the property is not a named peril, than no coverage will apply. For example, if your furniture is damaged in a flood it probably won’t be covered because flood is not a named peril.
• If the open perils option applies, coverage is extended to any cause of loss or “peril” unless the event causing damage is specifically excluded. If available, this option is preferable, as you can never predict the event that will cause damage to your property. 

Personal Liability
Many renters insurance policies also cover an insured’s personal liability. Let’s say you’re entertaining guests at a gathering at your apartment. A drink is spilled on the tile floor and someone slips and falls, causing serious bodily injury. As host, you could be found negligent for that person’s injury and made responsible for his or her medical bills. Without personal liability insurance, you would have to pay those potentially devastating costs out of your own pocket. Even worse, if a lawsuit were to arise, your personal assets also may be tapped to compensate that person for his or her injury. The types of bodily injury claims covered by your policy vary and should be reviewed carefully.

You also may be found personally liable for property damage caused to the space you are renting or to someone else’s property, such as a neighbor’s building. As with bodily injury, the types of property damage claims covered by your policy vary; again, review the coverage carefully.

Regardless of your living arrangement, choosing to live uninsured could prove financially devastating if your personal property is stolen or damaged. The same is true if you are responsible for someone’s injury or damage to his or her property. Call today and talk with a Trusted Choice® independent insurance agent for help in securing renters insurance for you or a loved one.