As a first-time renter — maybe it’s an apartment in Bloomington or a studio in New York City — it’s likely your first experience with renters insurance, and you may need some help understanding basic concepts. Check out these answers to some frequently asked renters insurance questions.
What is a deductible?
The deductible is an amount you’re responsible for paying out of your pocket before the insurance company pays a claim. For example, if you have a renters insurance policy with a $500 deductible and you suffer a $3,000 loss due to fire, your insurance will pay $2500, and you are responsible for the $500 balance. The purpose of deductibles is to discourage policyholders from submitting numerous claims for small amounts. If you have a $500 deductible and your $250 bike was stolen, there would be no sense in reporting the loss since the deductible would rule out an insurance company payout.
Is my jewelry covered?
This depends on the language in your policy. Some policies cover jewelry up to a certain amount if items are listed separately — or in insurance company terms — are scheduled. Expensive items like heirloom rings or engagement rings may need to be covered by a “rider” or “endorsement”.
What is insurance fraud?
Some desperate people look to any means to get money. If you still possess an item like a watch but tell the insurance company you lost it because you need the insurance claim cash and figure they’ll never find out, that’s insurance fraud. Working with a vendor to inflate a repair price for a damaged item in order to “bury the deductible” could also be considered fraud.
Am I covered for a flood?
Flood and water damage are two different things. While most renters insurance policies will cover you for a water damage caused by a broken pipe, a standard renters policy typically won’t cover water damage caused by weather-related flooding. For flood insurance coverage, you may have to purchase a separate policy. Disputes can often arise from claims due to water damage. During a severe thunderstorm, if rain enters your apartment, the insurance company may consider that a flood-related issue, while you may know the rain came in through a broken window caused by the wind.
Are all insurance company rates similar?
In a word, no. While companies use similar factors to price policies, the price each company will quote you will likely vary on how they assess your risk level. When shopping for renters insurance it’s important to do your research on which renters insurers are rated highly and to get multiple quotes from different companies. Also, you should check your policy rates every year, because insurance companies often raise rates whether you have had a claim or not. And after five or 10 years, you could be paying much more than you would with a different company.
Are insurance companies regulated?
States have insurance commissioners, and their duty is to monitor rates and practices of insurers. If you have an issue with an insurance company, there is usually an easy way to file a complaint with your state insurance department. If you’re subsequently still unsatisfied, you should look for an attorney and get legal advice.
It’s always important to read your policy, understand your rights and be honest if you have a claim. So before you buy your first renters insurance policy, make sure you understand how renters insurance works.
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