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When it comes to renters' insurance, the biggest mistake you can make is not having any. Because even if you think your possessions aren't worth very much, it only takes one sink to overflow into your neighbor's apartment to set you back $2,500 to $10,000 or more (the average claim size for sink, tub and toilet overflows).
But that doesn't mean you should sign off blindly on the first policy you find. It pays to do a little homework and ask a few questions. As president of New York City apartment insurance broker Gotham Brokerage for more than 35 years, I’ve personally helped thousands of renters find the best policy for their situation and budget. 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 often 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, including clothing, furniture, artwork, electronics--with limits on jewelry, fur and silverware. You can buy additional coverage for these restricted items.
Computer equipment is also typically 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?
Your insurance will cover you against theft, fire, smoke, explosions and water damage from bursting pipes and overflows. Breakage (for example, when your dog knocks your laptop onto the floor) is typically not covered.
Storm coverage is a bit of gray area: damage from wind is covered; water that seeps through a roof or wall is not. But if the roof is damaged by wind, the resulting water damage is usually covered.
It is important to know that if you are in a ground level or below-grade apartment, you typically won’t be covered for damage from floods or excessive rain. The best approach is to be proactive: Make sure there’s a pathway for water to flow, that drains are kept clear, and any pumps are in working order. You might also think about buying flood insurance, but there are restrictions on flood insurance for basement apartments, too.
3. What happens if someone gets hurt in my apartment?
Along with insuring you against damage that your stuff causes to other apartments—such as your bathtub or sink overflowing and ruining your downstairs neighbor’s new floor or Picasso lithograph—the liability portion of your renters' insurance covers you for injuries that happen inside your apartment, like when your visiting guest slips and breaks her 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. So if you intend to do either, be sure to ask your insurance broker.
Also, if you have an employee that works for you in your apartment for 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 bodily injury.
4. Does my policy cover my roommates too?
Renters' insurance typically covers spouses and immediate family members who live with you, but things get trickier when it comes to roommates.
At best, only two unrelated people can be named on a policy—and you’d better have a great relationship: Checks for claims 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 renters' 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 renters' insurance covers off-premises damage caused by fire, water damage from burst pipes, and vandalism. So if the dry cleaner catches fire and your clothes are destroyed, or a pipe breaks in your storage locker, 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 clothing or sports equipment, or ride a $3,000 bicycle.
7. How do I know how much renters’ insurance to get, and how big should my deductible be?
In New York City, renters’ insurance policies typically cost as little as $125 a year for minimum limits. Standard coverage levels for property damage are around $25,000 to $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.
Most renters’ insurance policies come with a $500 minimum deductible. You can save about 10 percent on monthly fees by choosing a $1,000 deductible and another 10 percent going to a $2,500 deductible. The deductible applies to property claims, not liability claims.
8. Does it matter how long an insurance company has been in business?
It’s a good idea 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 industry and are committed to it.
Check your insurer’s financial stability by looking them up on A.M. Best. 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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