Should you purchase a Renters Insurance Policy
for your new apartment?
To buy or not to buy...that is the question. Let's look at some real-life situations that demonstrate the need for renters insurance.
THE CHOICES:
You opt for $20,000 coverage for Contents (your personal property); $300,000 for Liability coverage; $1,000 Medical Payments coverage; $250 deductible; plus, you decide to purchase the Replacement Cost Coverage endorsement for personal property.
THE COST:
Cost for the policy is $140 per year.
THE PICTURE:
Friends-for-life Mary and Susie move into new apartments across the hall from one another on February 15. It's strange but Mary and Susie have the same tastes in clothes, furniture, music…they're virtually clones. If you'd enter Mary's apartment, you'd swear you were in Susie's…got the picture?
THE DECISION:
Before moving, Mary investigates the need for a renters insurance policy for her apartment. She realizes she may be strapped for money and could use the $140 for decorating items, but decides to buy the renters insurance policy at a cost of $140 per year. Meanwhile, Susie decides she needs that money to decorate so opts NOT to buy the insurance policy.
THE DILEMMAS:
Dilemma #1:
On April 20, there is a series of break-ins in the apartment complex where
Mary and Susie live. Both of their apartments are broken into and the same
items are stolen from each apartment.
MARY'S GOOD NEWS:
Mary, being the responsible one, had created a "personal property inventory"
when she decided to purchase insurance coverage. Yes, her insurance agent
twisted her arm to complete the form, but boy is she thankful now.
By taking an inventory of the missing goods, she can determine that the value of the stolen items from her apartment totaled $4,200. The best news is she has receipts for most all of the stolen goods.
Mary files a claim for her losses with her insurance company. Since Mary bought renters insurance including replacement cost coverage her loss will be covered—all items will be replaced.
Her out-of-pocket expenses for the loss include the $140 insurance premium (for the year) plus the $250 deductible—a total of $390. The insurance company makes good on the claim and replaces all of her stolen items.
SUSIE's NOT SO GOOD NEWS:
Although Susie didn't create the "personal property inventory",
she's able to determine—thanks to Mary—that her losses totaled $4,200,
too.
If Susie wants her stolen items replaced, she'd better have a nice stash of cash available, or she's just plain out of luck.
Guess that $140 spent decorating wasn't the best choice to make, huh, Susie?
Dilemma #2:
On June 13, Mary and Susie decide to have a "joint open-apartment"
party. Of course, everyone knows that Susie's agreed to the party in hopes
of getting some new "welcome to apartment life" gifts to replace
her stolen goods…..
Two guys from the apartment below—Mark and Ted—hear the commotion from the crowd and decide to crash the event.
After mingling a while, Mark and Ted decide to pass a Nerf football to each other between apartments. That's right—Mark's playing receiver in Mary's apartment, while Ted's the quarterback in Susie's pad. Just as Ted releases the ball, he trips over the ottoman in Susie's apartment. Meanwhile, Mark has taken a dive in an attempt to make an awesome catch to impress Mary. Unfortunately, he stumbles on a lamp cord and smacks into the wall—face first. Both guys were pretty banged up and the squad needs to be called for each.
Ted's Uncle Ernie the attorney, whose car license plate reads "ISUE4U", convinces both boys to file lawsuits against the girls for hosting a "negligent open-apartment" party to the tune of $200,000 each. Ted agrees to sue Susie for that amount, and Mark does so against Mary.
MARY'S GOOD NEWS:
Once again, since Mary purchased the renters policy, her liability
insurance coverage will cover her for this loss—if she's found to
be negligent in court—up to the policy limits (she opted for $300,000
coverage). Also, her insurer will cover the cost to defend her in court. Best
of all, these defense costs don't reduce the $300,000 coverage limit. Looks
like Mary should be OK if found to be negligent
and the court judgment remains under $300,000.
Once again, Mary's out-of-pocket expenses for the loss include the $140 insurance premium (for the year)—no deductible applies to the liability portion of the policy. If found negligent, the insurance company will make good on the judgment—up to the policy limits of $300,000.
SUSIE's NOT SO GOOD NEWS:
OUCH! Try pricing an attorney's hourly wage (usually over $200/hour), your
time off work, plus being held responsible if found to be negligent.
Let's just say that Susie might be taking out a big loan just to pay for the attorney fees.
Make a better choice next time, Susie...and purchase insurance!
