Renters Insurance

(September 2006)

News reports of home and apartment fires often include tragic stories of renters who´ve lost everything because they weren´t insured. A landlord´s insurance policy usually covers the house or building, but not the personal property of the building´s tenants. If you rent an apartment, duplex, house, or townhouse, you may need renters insurance to protect your belongings.

How Renters Insurance Works

Renters insurance is a type of residential property coverage designed for people who rent homes or apartments.  Renters policies, also called "tenant policies," typically include the following types of coverage:

• Personal property pays to repair or replace personal property that´s damaged, destroyed, or stolen. Policies may place payment limits on certain kinds of property. Limits vary by policy, but most provide at least $4,000 worth of protection. Common limits are $100 for lost cash, $2,500 for personal property used for business, $500 for valuable papers, and $500 for theft of jewelry, watches, and furs. Most insurance companies offer "endorsements" or policy add-ons to increase or expand the personal property coverage provided in the base policy.

Renters insurance also covers your luggage and other personal items when you travel. You may receive up to 10 percent of the amount of your policy or $1,000, whichever is greater.

• Loss of use pays for additional living expenses, such as food and lodging costs, if you´re displaced from your home or apartment after suffering a covered loss. This "loss of use" coverage is generally limited to 20 percent of a policy´s personal property coverage. For example, if you have $25,000 in personal property coverage, your loss of use coverage would be $5,000. You would be paid up to this amount for the reasonable amount of time required to repair or replace your rented property.
• Personal liability protects you against a claim or lawsuit if someone is injured in your home. A renters policy automatically provides $25,000 in liability coverage and pays your legal costs. Extra liability coverage is available for additional premium.

Types of Renters Insurance

Insurance companies can sell several types of renters policies in Texas, each with a different level of coverage. Two of the policy forms - the Broad Form (HO-BT) and the Comprehensive Form (HO-CT) - are standardized. This means the policy language and coverages included will be the same, regardless of the company writing the policy.

• HO-BT insures your personal belongings against covered losses specified in the policy, such as fire and theft. Losses not specified are not covered. Most renters buy Broad Form policies.
• HO-CT is an "all-risk" policy that protects your personal belongings against every type of event, unless specifically excluded by the policy. HO-CT policies are more expensive than HO-BT policies because they cover more risks.

Companies may also sell alternative policies or modified versions of the HO-BT and HO-CT if approved in advance by the Commissioner of Insurance. These policies are not standardized and usually provide varying coverages. Read your policy carefully to know exactly what coverages are included.

If a company offers you a policy with less coverage than you´d like, ask if other policy forms are available. You may also be able to purchase endorsements to increase or expand the coverage provided in the base policy. The availability of endorsements varies by company.

Most renters policies in Texas have a deductible equal to 1 percent of the total amount of coverage. A deductible is the amount you must pay out of your own pocket if you have a claim before the insurance company will pay. For example, if you have a $25,000 policy with a 1 percent deductible, you would pay the first $250 of the repair or replacement costs. The insurer would pay the remainder, up to your policy´s dollar limit, if you have replacement cost coverage. Some companies may require a higher deductible for theft.

Actual Cash Value vs. Replacement Cost Coverage

Renters insurance policies normally pay the "actual cash value" of your property if it´s stolen, damaged, or destroyed. This means the insurance company will subtract an amount for depreciation and wear and tear from the value of your property before paying your claim. For example, if you bought a television for $500 five years ago, it will likely be worth significantly less today. If you have actual cash value coverage, the insurance company will only pay you an amount equivalent to the current value of the television.  As a result, you probably won´t receive the full amount needed to buy a new TV.

For a higher premium, you can buy "replacement cost coverage" that pays the full cost of replacing your property, minus your deductible. You can usually add replacement cost coverage to your property for additional premium.

If you have replacement cost coverage on your HO-BT or HO-CT policy, your insurance company will pay up to $1,500 to repair or replace your damaged property. If the property damage exceeds $1,500, the company will pay the actual cash value first. You must then replace or repair the property with an item of like kind and quality before the company will pay the remaining amount of your claim. Other types of policies may have different procedures for paying replacement cost coverage. Read your policy or ask your agent to find out how your policy pays a claim.

Note: A complete inventory of your personal property can be helpful if you ever file a claim. Include the item, its value, and a serial number if there is one. Keep receipts for expensive items. Photographs or a videotape of your property can be especially helpful to document your loss to the insurance company. Keep a copy of the inventory and any photos or videos of your property in a secure place, such as a safe deposit box.

Shopping for Insurance

Not everyone living in a rented home or apartment needs a renters insurance policy. College students and other dependents temporarily living away from home may be covered under their parents´ or guardians´ homeowner policies. If you have dependents living away from home, ask your agent or company if your policy covers them.

Covered dependents´ personal property is generally covered up to 10 percent of the personal property limit of the parents´ policy. For example, if the parents have an insurance policy with a personal property limit of $50,000, their dependents automatically have $5,000 in coverage while living away from home. Dependents are covered up to 100 percent of the liability provided by the parents´ or guardians´ policy for claims involving personal liability and medical payments to others.

If you decide that you need renters insurance, it pays to shop around. Following are a few tips to help you shop:

• Rates vary widely. Get quotes from several different companies.
• When comparing prices, be sure you understand the coverage each policy provides.
• When getting a price quote or applying for insurance, answer questions truthfully. Wrong information could cause you to get an incorrect price quote or could lead to a denial or cancellation of coverage.
• Be sure to consider factors other than cost, such as a company´s financial strength and its customer service record. Buy only from licensed companies and agents. You can find out whether agents or companies are licensed and get information about licensed companies´ finances and their complaint histories by calling the Texas Department of Insurance Consumer Help Line or by visiting our website

  1-800-252-3439
  463-6515 in Austin
  www.tdi.state.tx.us

For More Information or Assistance

For answers to general insurance questions or for information on filing an insurance-related complaint, visit our website or call the Consumer Help Line between 8 a.m. and 5 p.m., Central time, Monday-Friday

www.tdi.state.tx.us
1-800-252-3439
463-6515 in Austin

For printed copies of consumer publications, call the 24-hour Publications Order Line

1-800-599-SHOP (7467)
305-7211 in Austin

Help us prevent insurance fraud. To report suspected fraud, call our toll-free Fraud Hot Line

1-888-327-8818

To report suspected arson or suspicious activity involving fires, call the State Fire Marshal´s 24-hour Arson Hot Line

1-877-4FIRE45 (434-7345)

The information in this publication is current as of the revision date. Changes in laws and agency administrative rules made after the revision date may affect the content. View current information on our website. TDI distributes this publication for educational purposes only. This publication is not an endorsement by TDI of any service, product, or company.

For more information contact: ConsumerProtection@tdi.state.tx.us