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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
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