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Insurance
A cautionary tale-and lessons learned
Andrea Bennett
November 11, 2005: 11:59 AM EST

Last month, I got home from work to find that a thief had broken into my apartment and left me with little more than a pile of clothing. I'm a personal-finance reporter, so you might assume my renters policy covered the loss, right? Not quite. Though I'd been planning on getting a policy--I'd moved in only a few days before--I didn't have a shred of coverage. Now my only consolation is the following set of lessons I learned while researching and settling on a policy.

Renters have it cheap. An informal poll of my renting friends revealed that almost none were insured. (In fact, the Insurance Information Institute says that only 29% of renters nationwide are covered.) But most of them were surprised, and ready to sign up, when I told them how little a policy typically costs--$169 a year on average, according to the National Association of Insurance Commissioners. The reason for this is simple: Unlike a homeowners policy, renters insurance covers only the value of your belongings, not the physical structure itself.

Not all rental policies are the same. An actual-cash-value policy will pay only what your things were worth when they were damaged or stolen, which usually ends up being about what you'd get for them at a garage sale. So it generally makes sense to pay a little extra for a replacement-cost policy, which will run 15% to 20% more. For me it will mean the difference between about $170 and $200 a year--in other words, not much. (Allstate has a property-reimbursement option, which will pay you for things you replace and give you the cash value of things you don't.)

Some things are covered, and some are not. Most policies place a limit on reimbursements for any single item, so be sure to attach a so-called floater, or rider, for anything that exceeds the cap, like jewelry, art or a computer. And parents of college students, take note: Standard homeowners policies often cover full-time college students who are under 24 years old and living on campus.

The Web makes shopping easy. I started shopping on the Web at Netquote (www.netquote.com) by filling out an online questionnaire. Within 24 hours, agents from three insurers called me with quotes, two of which were competitive. But the lowest came from Homesite (www.homesite.com), which would cover $16,000 worth of stuff and $300,000 in personal liability, with a $250 deductible, for $162 a year.

You can lower your costs (and sometimes protect yourself in the process). Nearly all major insurers will discount your premium--by as much as 15%--if you install security devices like deadbolts and smoke detectors. Most local police departments will, at no charge, send an officer to make security recommendations. An inspection won't lower your premium, but acting on the suggestions often will. If you own a car, consider bundling a rental policy with your auto policy, for which many companies will give you a discount--in some cases more than you'd pay for a rental policy alone. And think about putting at least some of your valuables in a safe-deposit box. The cost of a rider for jewelry averages $4 per $100 of value if you keep it at home, but between 40% to 50% less if you stash it in a safe-deposit box when not wearing it.

--ANDREA BENNETT