Renters, Condo & Townhome Insurance

Monday, March 6, 2017 - 8:00am
picture of condo with rental insurance

Why do complexes require it? How much does it cost? What does it cover?

Recently more and more apartment, condo, and townhome complexes are requiring that their tenants carry renters insurance.  This increase has created a lot of questions as to the cost and coverage of renters insurance.  This week's article will discuss three fundamental questions, What does renters insurance cover?  How much does it cost?  And why do apartment complexes require tenants to carry it?

What does renters insurance cover?

To understand the details of why apartment complexes require tenants to carry these policies, it is first important to understand what the policy covers.  There are two main areas of protection that consumers should focus on when deciding their insurance coverages, Liability coverage, and Personal Property Coverage.  These are the first two questions an agent will ask you about when preparing your rates.  This makes it important for you, the consumer, to understand what you need and want.

Liability Insurance Coverage - The Liability Coverage on a renters insurance policy works the same way that it does on homeowners or an auto insurance policy.  Liability coverage protects the insured from legal action arising when the insured is responsible for someone else's loss.  This could be a tangible loss, for instance losing or damaging someone else's property.  Or, it could be a physical injury and illness.  It protects you when you damage (or can be held responsible for damaging) other people's property or physically injuring them.  Liability insurance will cover the legal fees and court cost associated with a legal battle, as well as any settlement or court ruling.

Some examples of liability claims are:
1. You have a guest visit your apartment, and they trip and fall over an object you left on the carpet.
2. You borrow a friends computer for the weekend.  While working on the computer, you spill a glass of water on it and fry the circuit board.

When purchasing liability insurance for renters insurance coverage is usually purchased in increments.  Most apartment complexes require the tenant purchase at least $100,000.  But you can buy higher coverage in additional increments.  Other common limits include $300,000, $500,000, or $1,000,000.

Property Insurance Coverage - Property insurance coverage protects you when your own property gets damaged or destroyed.

Some examples of Property Claims are:
1. Apartment fire burns up everything in your apartment.  You need all new furniture, clothes, food, toiletries, and electronics
2. Someone breaks in and steals your computer and TV

Because Property Insurance protects your personal possessions, it also requires a deductible.  The deductible is the amount you must pay to replace or repair your property. Think of it as self-insuring your items.  The most common deductibles are $500 and $1,000.

Apartment complexes are not concerned with Property Coverage.  They only care about liability insurance.  But it is important for you as the consumer to know both how much coverage you will need to replace every item you own and how much you want your deductible to be.  These will be some of the first questions an agent will need to determine your coverage.

Other Coverages - Renters insurance does have more protection, like medical payments, and back up water.  But the two most important coverages will be the Liability and Property coverage.

How Much Does Renters Insurance Cost?

a condo complex with renters insurance coverageConsider the coverages that you have on the policy when you look at the cost.  Liability insurance is going to be the cheaper of the two coverages when comparing.  You are going to spend more on Property coverage than Liability.  The good news is that you can change the deductible or the total amount of Property coverage to adjust the rates.

But, like homeowners insurance, the rates are also based on your insurance grade.  This consist of a collection of items including your location, the crime rate in the area, previous claims, and most importantly, your credit score. So the rates will vary.  However, you should be able to get a reasonable policy with monthly payments between $20 and $30.  This can be advantageous since many insurance companies will bundle your insurance and give you close to the same value off of your auto insurance.  It may end up not costing you anything to insure.

However, I have written some policies as low as $12 each month, or as high as $50 each month.  It all depends on the client's circumstances.  But the majority of clients in Oklahoma have arates that are between $20 and $30.

Why do Apartments Require Renters Insurance?

The apartment complexes are primarily concerned with liability coverage.  The liability covers them in two different ways.  First, it provides them additional protection
for major lawsuits.  Several years ago there was a lawsuit that arose that caused a stir with renters insurance.  A young adult, who is a tenant of XYZ apartments, holds a party at his apartment complex.  During the party, there is an accidental fatality. The tenant did not have any insurance, and the family of the deceased could not collect anything from him.  So they went after the apartment complex for damages.  

If the tenants carry insurance, this reduces the risk of a liability claim being placed on the apartment complex and not the tenant, due to a tenant's negligence.  At the very least, they apartment will be the second payer and not the primary.

The second reason that the apartment complexes require coverage is to protect their own property.  Although the apartments charge a down payment and have their own insurance, they still may need additional protection.  There are claims each year where a tenant destroys the apartment so badly that the downpayment does not come close to paying for the repairs.  If the insurance files a claim on their insurance policy, they have to pay a deductible and face increased rates.  All because of an unruly tenant.  
This way, they can file a claim on the tenant's Liability Coverage, the lessee's insurance will pay for the repairs, and the apartment complex is not out any additional money. 

But property insurance is critical to the apartment complex as well.  It can help the apartment complex in the event of a large disaster.  Let us say that a tenant in the complex left the stove on and it caught fire.  The entire unit of the complex burned down. You lived in that unit but did not start the fire.  You lost all of your property.  If you have property coverage, then instead of trying to collect from the apartments liability (which you would have to argue negligence) and hope they have enough to pay you at the end of the claim.  You can file a claim with your insurance and go after the apartment complex for the deductible.  The apartment complex would much rather pay $1,000 per tenant rather than $30,000.  

So when you are looking at moving into an apartment complex, it is important to understand what kind of coverage you need.  Not just for the apartments companies satisfaction, but for your protection.  Be sure to know how much you would need if you lost everything you owned.  How much are you willing to pay if something did happen to your property?  Does your insurance company offer discounts for bundling?  If so, what would the total discount be and does that offset the price of the renter's policy?  Remember to talk face to face with a licensed agent.  Calling a 1-800 number or shopping online is not the way to protect yourself or your belongings.  There are local agents out there who are more concerned that you get the right coverage at a fair rate, rather than just trying to close another sale.

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