Renter's insurance necessary to protect assets

Many people don’t bat an eye when they purchase homeowner’s insurance: No matter the expense, they know it’s a necessary and oftentimes mandatory aspect of homeownership. But how many renters think the same way about renter’s insurance?

According to a recent survey conducted by the Manhattan-based New York State Insurance Department, that number is between 10 and 15 percent.

“Most people don’t think they need it. They don’t want to spend the money, and they don’t think their possessions are worth a lot,” said Barry Bistreich, a principal insurance examiner with the New York State Insurance Department. “Most people who don’t have it are unaware that they should have it. It’s not really that they can’t afford it.”

Dermot Dolan, an agent with the State Farm Insurance office in Bridgehampton, agreed that a common misconception is that a lot of renters don’t think their possessions are worth enough to purchase a policy protecting them.

“You would be surprised how much it would cost to replace everything,” he said, adding that it’s not just about the furniture the renter owns. “Imagine if you had to replace your entire wardrobe, all your electronics.”

Hampton Bays-based Allstate Insurance Agent Ken Pagano agreed. “You could say that it is a policy that seems to be overlooked by people,” he said. “They don’t realize how much they need it until something happens.”

To further illustrate the point, that was exactly the case late last year for two tenants whose house burned down in North Sea: Neither of them had renter’s insurance.

“I was working for State Farm when all of this happened,” said ill-fated renter Maria Fernanda Posada, who now lives in Southampton with her husband, Alex. “We walked out of there with our PJs on and barefoot. We lost all of it.” She noted that the value of all of their possessions added up to about $20,000—and now she advises all of her clients to obtain renter’s insurance.

Mr. Dolan added that a second common misconception among renters is that the landlord’s insurance will cover them if there is an accident, when in reality that insurance covers only the dwelling and will never pay for a tenant’s possessions.

In most cases, renter’s insurance covers not only that person’s assets in the case of a theft, fire or other disaster, it also indemnifies that person if there is an accident on the property. For example, if a renter is hosting a party, the renter may be held liable if someone injures themselves during the party and he or she is found to be negligent.

According to Mr. Dolan, renter’s insurance is often a lot less expensive than people think it will be. Typically, he said, a policy with up to $100,000 worth of coverage will cost about $25 per month. Less expensive but more basic policies generally run from $150 to $200 per year, according to Mr. Pagano.

Obtaining renter’s insurance is appropriate for people who are renting annually or seasonally, though most policies are usually available only on an annual basis. Getting a quote involves providing a list of possessions and their collective value to the agent, and the amount of coverage can vary depending on whether a house or an apartment is being rented.

The cost of renter’s insurance can also vary depending on where the house or apartment is located: Someone renting a house near the water will most likely pay more than someone who lives farther inland. People living in homes or apartments in areas that are more prone to burglary also will pay more for their renter’s insurance.

Mr. Dolan, whose firm offers several other types of insurance, said he always recommends to landlords who are renting out their properties to insist that their tenants have renter’s insurance, because it will also protect them in the case of an accident.

“If there was a bad accident at their property, if the tenant doesn’t have insurance, [the injured person] isn’t going to just go away,” he said. “If you’re the only person with insurance protection, you’re going to get sued ... I advise my clients that they not only have their tenants get renter’s insurance, that they name the property owner as an additional insured person under the policy.”

A shopping guide for people who would like to purchase renter’s insurance is available at the New York State Insurance Department’s website at ins.state.ny.us.