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* Dear Shannon : I recently relocated to California and into my first apartment. I don't have many belongings, but I do plan on making basic apartment furnishing purchases. Do I really need to invest in renter's insurance for my one bedroom apartment? I know so many who rent and don't have it. Is it worth it since I'm just starting out? From –The California Dreamin' College Grad, From Atlanta Georgia.
Dear California Dreamin' , Yes. Renter's insurance is a must-have. While you may not have a lot of possessions, consider what it would be like not to have anything at all. This could happen if you become the victim of theft; or even worse, fire or another natural disaster. Your landlord will probably not cover any damages to your personal property. Imagine a water leak ruining your furniture from the neighbor's overflowing toilet above your unit. Who's going to pay for that?
Renter's insurance can take the worry away, and it's very affordable. You "Gotta Have It" (Lenny Kravitz, 2001). Here is the quick 411 on renter's insurance.
What It Covers
According to MSN's Money Central, renter's insurance covers many different "perils" you may face in renting your home, such as:
fire and lightning
windstorm, hail, or an 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
electrical surge damage
Most of your personal belongings are covered under the typical renter's insurance policy. Even if you don't have a lot of possessions consider those things you do have and that are near and dear to you, like: your mp3 player, laptop computer, and cell phone. These can all be protected. Also typically, jewelry (up to $2,000 for most policies) is covered, too.
Renter's insurance may also cover your additional living expenses while your apartment is being repaired, or you're relocating ( i.e., another apartment in the same price range as your previous place). But keep in mind, most policies limit your additional living costs to 40% of your policy's total value. For example, if you're insured up to $50,000, then they'll cover $20,000.
Some policies may cover up to two months of unemployment, by helping you with your monthly rent ( i.e., up to $500). Finally, renter's insurance may provide coverage for your legal costs, such as when someone sustains an injury or damage to their property at your home.
The Costs
Don't be SCARED ("Danger [Been So Long]" Mystikal, 2000) In many cases, the average costs for renter's insurance ranges from $150-$300 per year, or $12.50-$30.00 a month; which is less than your weekly coffee from Starbucks.
Your monthly premiums ( i.e., your bill) are going to depend on several things, such as:
§ where you live,
§ how much money you put down upfront ( i.e., your deductible),
§ adding extra coverage for things, like computers worth over $5,000 or expensive jewelry worth over $2,000, and
§ whether or not natural disasters are common in your region.
Remember to shop around and get the most for your money. Be sure to ask about discounts, since most companies will give them if you have things like smoke or fire detectors, fire extinguishers, or a burglar alarm in your home. Finally, there may be additional discounts for retirees.
Types of Coverage
There are two basic renter insurance policies to choose from: actual cash value ("ACV") or replacement cost coverage.
ACV will pay for the damaged/stolen item according to its value when it was stolen. For example, if you bought your Ipod™ two years ago, it has certainly declined in value. Thus, you will only get what it is worth today; which will not be enough for you to purchase a new Ipod.
The replacement cost coverage policy will pay you what it cost to get you that same item. In many cases you will have to purchase the item yourself and then send the insurance company a receipt for reimbursement. The replacement cost coverage also has a slightly higher premium than the ACV.
Recap
If you're finally moving on up into that "deluxe apartment in the sky," just getting out of your folks' house, or have been a renter for years without coverage, it's important for you to buy renter's insurance.
To California Dreamin' -- I highly suggest that you make this small investment to protect your assets. This will make certain that you don't have to take the "Midnight Train [back] to Georgia" (Gladys Knight & the Pips 1973), to ask your folks for cash and a place to stay.
Helpful Links
Check out this online calculator to see how much you truly have in personal belongings: www.renterssecurity.com.
Also, check out these websites for more information on renter's insurance:
www.rentersecurity.com
http://info.insure.com/home/renters.html www.GEICO.com
www.iii.org/media/publications/brochures/rentersins/
Shannon King Nash is the author of the award-winning book entitled, "For the Love of Money: The 411 to Taking Control of Your Taxes and Building Your Net Worth." The above materials were taken from that book and may not be reproduced without the express written consent of the author. Shannon uses song lyrics and entertaining stories, ripped from the headlines, to teach readers how to manage their finances and taxes. Shannon is a CPA, Tax Attorney, and regular expert commentator on KJLH FM Radio in Los Angeles, and has appeared on national television. Contact the Nash Management Group at 818-986-2665 or visit www.nashgroup-usa.com .
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