In the world of the tenant, leaky faucets, rising property taxes and other non-glamorous realities of ownership are someone else’s problem.
And while it’s true that most renters don’t have to worry about insurance coverage for a hail-damaged roof or a visitor’s tumble on a snow-covered sidewalk, the level of responsibility jumps considerably inside the tenant’s four leased walls.
While most landlords carry property and liability insurance, such a policy only covers their property and their liability. Many tenants discover their own true level of vulnerability only after a fire, tornado or other catastrophic event, said Carolyn Gorman of the Insurance Information Institute of Washington, D.C.
“The most common misconception among the renting community is that their landlord is carrying insurance that protects them and their personal property,” Gorman says. “The landlord’s policy will generally pay to fix walls, plumbing and heating systems, but tenants need to cover their own possessions separately with a renter’s policy.”
Renters’ policies range in average price from $90 to $125 a year. Variables affecting cost include the location of a residence, the amount of coverage and basic tenant profile (e.g., smoker vs. non-smoker).
Personal possessions
Without renters’ insurance, a tenant’s household contents and personal possessions are not protected in the event of damage or loss. Simply stated, if a pipe bursts in your apartment and ruins your sofa, if a tree falls on your rented house and trashes your wardrobe, if the wind blows your welcome mat away, you foot 100 percent of the bill for new stuff.
According to Gorman, tenants’ or renters’ insurance is really a form of homeowners’ insurance and, like homeowners’ insurance, is available in varying coverage amounts. A tenant’s policy insures household contents and personal possessions against losses stemming from a variety of events, ranging from fire or lightning to theft, smoke damage or public riot.
As with homeowners’ insurance, possessions can be insured for replacement value (what a new one would cost) or cash value (what your lost item was actually worth). Certain items with limited coverage value may be covered for their full replacement value through the use of “floaters,” or extended item-specific policies that cover something wherever it is.
“People really need to be aware of what’s covered and for how much,” Gorman says. “For example, standard renters’ coverage for a computer would be around $2,500, but if you have a home office with a lot of equipment, $2,500 probably won’t replace everything.”
Renters’ insurance also provides important protection from personal liability lawsuits that can arise from something as simple as someone slipping on the kitchen floor. The liability coverage applies to injuries or damages caused by a tenant, a member of the tenant’s family, or even a tenant’s pet, at or away from home, and includes the cost of defending against lawsuits.
Harry Fabie, an agent in Prudential’s Matteson office, says the liability question is often a key motivating factor for renters considering a policy.
“Everybody can relate to the fear of somebody stopping by and slipping on a roller skate, or even some guest slicing their hand open carving a turkey. Do you want to pay for the hospital bills and court costs?” Fabie says.
Threat of suit
The Insurance Institute’s Gorman adds that many renters are also not aware that their landlord’s insurance company can sue them, should the tenant be legally responsible for any property damage.
“Suppose you have a fire related to cooking, and the kitchen is damaged. The landlord’s insurance will cover property repairs, but under what is known as a subrogation clause, the landlord’s insurance company can come after you to recover damages if, say, the fire happened because you never cleaned the oven. Renters’ insurance would cover that cost.”
Bernard Kleina, executive director of the HOPE Fair Housing Center in Wheaton, says his office gets calls regularly from tenants, landlords and even real estate agents on the issue.
“I think we have to understand that there’s a lack of sophistication, especially on the part of many renters, as to where responsibilities really lie,” he says. “We hear about, say, a water leak, water damage and the ensuing argument about who’s at fault. The landlord refuses responsibility, saying it’s the tenant’s fault and the tenant says he didn’t cause it, so who pays for what? The reality is most tenants we talk to don’t have renters’ insurance because they either don’t know about it or just can’t afford it. Questions go back and forth and we try to be a general information resource for everybody.”
Opinions vary among both tenants and landlords on the value and necessity of renters’ insurance.
George Castleberry owns a three-unit building on Chicago’s Northwest Side. He and his wife, Debbie Leavitt, live in one unit. Debbie rents another to herself as the site of her photography business, and the third unit is rented out as a residence.
Doesn’t press it
“The lease I use for the tenant says they are supposed to get renters’ insurance, but I don’t really press the matter,” Castleberry says. “I do it primarily so I won’t be legally liable for their belongings. I know I’m really not, but by putting it in the lease I try to keep myself out of court to begin with.”
A long-time renter prior to purchasing his current building, Castleberry says he didn’t have renters’ insurance during many of his years as a tenant, but came to change his mind several years ago.”
“My brother had been burglarized, crime seemed to be going up and by then I could afford it, so I took the opportunity. It has some value, but I still don’t push it now as a landlord.”
Though landlords may ask renters to secure their own insurance, insurance companies are looking at more factors than ever when issuing policies. Many firms will not offer renters’ policies to more than two unrelated individuals at the same residence due to the increased risk of the problems-such as irregular payment or even fraud-that can arise from roommate conflicts.
Betty Piepenbrink was a homeowner for 50 years before becoming a renter in south suburban Steger four years ago. When she made the move, securing a renter’s policy was high on her list of priorities.
“I was surprised at how affordable it was,” says Piepenbrink, who pays $111 a year, less than half what she paid as a homeowner in Monee.
“It’s not that I have so many valuable things, but they do have value to me, and it was important to me that I know they’re covered in some fashion. I worry about accidents and theft,” she adds.
Not everyone is so concerned. Eric Hulander let his renter’s insurance lapse over a year ago when he traded a 24th-floor apartment in Streeterville for one closer to earth in Arlington Heights.
“It just seemed ludicrous, so I dropped the policy when I moved. The only reason I had it was that I have a waterbed and living downtown I had visions of the bed breaking and doing 23 floors’ worth of damage to the apartments below,” he says.
Hulander notes that his decision had more to do with personal principle than cost.
“None of my possessions is that fundamentally significant or valuable that I can’t easily replace it. And I’m usually the only one here to slip and fall. My car was a significant purchase, so I can see insuring that, and if I purchased a home I would definitely insure it as a major investment, but I just won’t seek out renters’ insurance again. For me it’s an ounce of unnecessary prevention.”
Carolyn Gorman admits that Hulander’s observations are neither uncommon nor fundamentally unreasonable, just risky.
“I think most people can go their entire life without any severe problems. But the risk is there and it only takes one event a lifetime to make you only miss that coverage.”
