Why and When to Purchase Renters Insurance

In January 2018, a walkup on West 157th Street suffered a massive fire after a toaster malfunctioned. The Washington Heights fire wasn’t just any fire—it took more than 200 firefighters and seven hours to get the blaze under control. A year later, one former tenant, Zachary Kussin, a real estate reporter for the New York Post, wrote about the fire and its aftermath. Kussin owned a modest $300,000 home in the building and had insurance, which is required for owners, but some of his neighbors, including several families living in rent-stabilized units, did not have insurance. For them, the past year has been a different story.

One of Kussin’s neighbors, who had spent the previous 38 years living in her rent-stabilized two-bedroom unit in the building, lost 90 percent of her belongings to water damage. After the fire, she was first moved, along with her daughter and mother, to a Days Inn in Long Island City. Eventually, she was moved to a single-room-occupancy building in Harlem—care of the Department of Housing Preservation and Development. Without renters insurance, Kussin’s neighbor has been just a step away from homeless for the past year. At present, she doesn’t have access to a kitchen, which means burning through about $75 a day on takeout food, and spending another $224 per month on storage for the few belongings she did manage to salvage from the fire. When she does move back in, she will need to refurnish, and this will also be out of pocket.

Kussin concludes his article with firm advice for renters—get insurance. He’s right. In February 2020, The Fire Department of New York City (FDNY) estimates that there are 2,200 structural fire calls each month in New York City, many impacting residential rental units. But fires aren’t the only reason one needs insurance. As many renters discovered following Hurricane Sandy, flooding can do just as much damage as fire. But bear in mind that you’ll need separate insurance in the event of a flood since floods are generally excluded from both home and renters insurance policies.

How to Select a Renters Insurance Policy

To begin, when you purchase renters insurance, you’re purchasing insurance to cover the belongings inside your home only. The building owner also must have insurance—their insurance covers the actual structure, including any appliances, but it will not cover your belongings. The good news is that because you’re just covering your belongings and the not the actual structure, renters insurance is remarkably inexpensive. In fact, you might be able to purchase renters insurance for less than $20 monthly.

What Your Renters Insurance Will Cover and Under What Conditions

Generally, renters insurance only covers belongings in your home (clothing, art, electronics, furniture and so on). While $50,000 may be adequate, some renters will opt for a policy that covers much more. In most cases, however, unless you have a valuable art collection, a policy in the $50,000 to $100,000 range should be adequate. In addition, some policies cover liability. This means that if someone is injured in your home, they can’t sue you. Finally, many renters insurance policies cover additional living expenses (e.g., a place to stay in the event that your home is no longer inhabitable after a fire or other insurable event).

Also bear in mind that there are specific “events” under which renters insurance is applicable. Most renters insurance policies, commonly known as HO-4 policies, cover the loss or destruction of personal belongings from 16 specific events: fire or lightning; windstorm or hail; explosion; riot or civil commotion; aircraft; vehicles; smoke; vandalism or malicious mischief; theft; volcanic eruption; falling object; weight of ice, snow, or sleet; accidental discharge or overflow of water or steam; sudden and accidental tearing apart, cracking, burning or building; freezing; and the sudden and accidental damage from artificially generated electrical current. It is important to note that renters insurance does not generally cover earthquake or flood damage; if you live in an area at risk for flooding, you may want to purchase a separate policy.

Explore Providers

Most insurance companies offer renters insurance, and as already noted, it can be remarkably inexpensive. Also, unlike many other types of insurance, you can typically purchase renters insurance online without any home visit or inspection.

Find Out If You Qualify for Bundled Insurance

If you already have another form of insurance—specifically, auto insurance—you can likely bundle your renters insurance. Depending on your provider and the amount of renters insurance you wish to purchase, this may cost little as $15 per month.

How to Access Your Renters Insurance When Needed

Hopefully, you’ll never need to use your insurance, but if you do, a few things to bear in mind. First, before disaster strikes, create a detailed list of all the items in your home—the more detailed the better. If you have any big ticket items (expensive items of furniture or art, ensure you have a digital record of the receipts and appraisals for these items). Second, contact your insurer as soon as possible—the process can take time. Third, be aware of your policy’s specific terms. Depending on the policy, you’ll either receive a payment for the replacement value of the item or items you’ve lost or a payment based on the actual cash value of your belongings (e.g., if you have a television set that is a decade old, you’ll only be insured for the value of a decade-old television set and not a new one).