Have you ever taken a few minutes to estimate the total value of what you own in your apartment or rental home? Furniture, clothes, television, stereo, computer -- it likely adds up to a big number. In fact, the average rented two-bedroom residence contains more than $20,000 in personal possessions.
Now imagine having to replace everything you own if a fire or other disaster strikes.
The financial loss could be devastating, as it was for Airman 1st Class Michael Lecik, whose rented house was destroyed by a fire last year. When the smoke cleared, he and his wife estimated close to $32,000 in property losses. Regrettably, the Leciks did not have renters insurance at the time, leaving them alone to face the financial hardship of rebuilding the life they knew.
If the unthinkable should happen to you, having renters insurance could be the difference between an inconvenience and a financial nightmare. Subject to certain conditions and exclusions, renters insurance policies pay to repair or replace personal property that is stolen, damaged or destroyed due to fire, severe weather events and other causes. It also can protect your financial assets if you are found liable for property damage or personal injury.
Unlike homeowners, most renters aren't required to carry insurance. As a result, some servicemembers may view renters insurance as an unnecessary expense. But a renters policy, which usually costs less than $20 per month, can offer a tremendous value.
Many servicemembers don't purchase renters insurance because they mistakenly assume they are protected by their land lord's insurance. While home or apartment owners may carry insurance that covers the structure itself, most often the landlord's policy does not cover the dwelling's contents - your belongings.
The military provides some protection for personnel living in government-owned housing, but servicemembers should be sure to understand the military's limits for reimbursement. Officers living in privatized family housing might find the value of their belongings far surpasses the government's coverage limit. And while junior enlisted personnel may not own furniture or major appliances, a CD collection, bicycle, DVD player and other items could add up to warrant an inexpensive renters policy.
Levels of personal property coverage can vary by company and policy. A basic policy may cost as little as $5 per month for $2,500 worth of coverage, while a more comprehensive policy might offer $100,000 worth of coverage for $30 per month. All companies place limits on individual categories of property. For instance, a typical policy might limit total payments to $200 for cash and coins; $1,000 for valuable papers; $1,000 for theft of jewelry and watches; and $2,000 for theft of guns.
If you have specific items for which the value exceeds the policy limits, you may elect to pay a few dollars more to add a "personal article floater" to your coverage. Often used to fully insure expensive jewelry or electronics, "floaters" have no deductible and usually cover a broader range of claims.
Renters insurance also protects your financial well-being through liability coverage. If a visitor to your apartment slips on a wet floor and is injured, you could be held responsible for thousands of dollars in medical bills. In this type of situation, a renters insurance policy likely would cover the costs up to a specified limit.
Or if you leave an iron on and a fire breaks out, your simple mistake could leave you personally responsible for damages to the building and others' property. Again, renters insurance could provide $100,000 or more to cover your liability, and even your legal fees in some cases.
Taking It with You
For military personnel who re-locate frequently, another advantage of renters insurance is its portability. During your move, most renters policies cover your personal possessions during shipment or while in storage. And when you travel, your luggage and other personal items are covered up to the limits of your policy. So if your duffel disappears from the airport baggage claim or your camera is stolen, there's a good chance renters insurance will cover it.
Before you buy Renter's insurance may not be necessary for all servicemembers, so it is important to understand the value of your possessions to determine exactly how much coverage you need, if any.
The first step is to take an inventory of your belongings, including how much you paid for each item and its current value. Make a record of your possessions, with pictures or a video camera, and store the records in a safe place that is outside your home so they are less likely to be destroyed in a disaster. The record can help you determine your coverage needs, and also can serve as your proof of ownership if a loss occurs, helping the insurance company to estimate your payment.
Next, determine if you prefer to purchase a "replacement-cost" policy, which covers the cost of replacing lost items at today's prices, or a "cash value" policy, which covers what the item is worth after depreciation. Although it typically costs about 15 percent more, many renters find replacement-cost coverage to be a better value.
Especially important for military personnel, look for a renters insurance policy that does not contain territorial limits. A policy without these restrictions will cover your belongings nearly anywhere in the world, with few exceptions.
We all face enough financial challenges without having to overcome disaster alone.
Explore your options for affordable renters insurance today.
Mitch Swanda is a salaried certified financial planner practitioner with USAA Financial Planning Services, one of the USAA family of companies. USAA has served the military community since 1922. Swanda also served six years on active duty in the U.S. Navy. (c) 2004 USAA. All Rights Reserved.