The biggest blunder people make when it comes to renter’s insurance is not getting any.
But it’s not the only mistake.
As the president of a New York City property insurance brokerage for more than 25 years, I’m very familiar with the questions renters ask before they buy insurance. I’m also familiar with the questions they should be asking but don’t.
Here’s what you need to know besides how much it costs:
1. Is all my stuff covered?
Most policies cover the bulk of your personal property—clothing, furniture, artwork, electronics--with limits on jewelry, fur and silverware. You can buy additional coverage for these restricted classes.
Computer equipment is typically also included. However, if you work primarily from home, it may not be. Additional coverage is usually available for business equipment you own.
2. What “perils” are covered?
Usually your insurance will cover you against theft, fire, smoke, explosions and water damage from bursting pipes and overflows. Breakage (for example, your dog knocks your laptop onto the floor) is typically not covered.
Storm coverage is a bit of gray area; damage from wind is generally covered, but water that seeps through a roof or wall is generally not.
If you’re in a ground level or below-grade apartment, however, you typically won’t be covered for any damage from floodwaters or excessive rainfall. The best approach is to be proactive: Make sure there’s a pathway for water, that drains are kept clear, and any pumps are in working order. You might also think about buying flood insurance.
3. What happens if someone gets hurt in my apartment?
In addition to providing liability coverage for damage inflicted by you to another apartment (for example, your bath tub or sink overflows and ruins your downstairs neighbor’s new floors), apartment policies cover you for injuries sustained by others inside your apartment, like when your part-time housekeeper slips and breaks a leg on your wet bathroom floor.
There is a big, noteworthy exception: Most polices don’t cover you for anything that happens when you sublet your place or rent it out in other ways, such as through AirBnB.com. So if you intend to do either, ask.
Also, if you have an employee that works for you 40 hours or more per week, New York State requires that you buy workers compensation and statutory disability insurance.
It’s worth noting that liability coverage is fairly inexpensive. A basic policy typically comes with $100,000 worth of liability coverage; for about another $50 a year, you can raise this limit to $500,000. If you have assets you want to protect, this is recommended, as you can be sued personally for damage and personal injury.
4. Does my policy cover my roommates too?
Renter’s insurance typically covers spouses and immediate family members who live with you, but things get trickier when it comes to roommates.
Usually, only two roommates can be named on a policy—and you’d better have a great relationship: Checks for damage are made out to both of you, even if it’s your laptop that was destroyed and your roommate has long since moved out. For more info, see 5 Things All Roommates Need to Know About Renter's Insurance.
5. Is my dog covered too?
If your dog bites someone inside or outside your apartment, the liability portion of your renters insurance usually covers this—unless you own an ‘aggressive’ breed such as a pit bull, Rottweiler or wolf hybrid. If in doubt, ask.
6. Is my stuff covered if it’s damaged or stolen outside of my apartment?
Most policies cover off-premises damage caused by fire, water damage from burst pipes, and vandalism. So that means if the drycleaners catches fire and destroys half your wardrobe, or your storage locker floods from a burst pipe, you may be covered.
If your personal property is stolen outside your apartment, that may also be covered. Or you may be required to take out extra insurance. The cost typically charged annually for off-premises theft insurance is probably worth it if you travel a lot with expensive suits or store a $3,000 bicycle in the basement.
7. How much does renters’ insurance cost? How do I know how much to get and how big should my deductible be?
In New York City, renters’ insurance policies typically cost as little as $120 a year for minimum limits. Standard coverage levels for property damage are around $25,000-$50,000 and can go substantially higher. Calculate how much you need by adding up the replacement value of your belongings (don’t forget to run the numbers for your clothing, the most commonly undervalued category).
Many people choose not to insure for the full replacement cost, figuring the risk of a total loss (say, a fire that guts everything) is not that high. In an apartment, it’s a matter of how much of an uncovered loss you think you can afford in light of the cost of the insurance.
Many renters’ insurance policies come with a $250 minimum deducible. You can save about 10% by choosing a $500 deductible and another 10% going to $1,000 deductible.
8. How long has the insurance company been in business?
It is useful to buy renters insurance from an insurance company that’s been doing business in your area for years—Travelers’ and Chubb are two examples. They know the area and are committed to it.
Check your insurer’s financial stability by looking them up on A.M. Best (http://www.ambest.com/) You want to buy insurance from a top-rated, financially secure company.
Jeff Schneider is the president of Gotham Brokerage Co., Inc., an insurance brokerage serving NYC and the tri-state area for over 45 years.
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