Freelancer Louis DeNicola paid renters insurance premiums for years without ever filing a claim. Then about $2,100 worth of his possessions were stolen.
After I graduated college and moved to New York City, my grandfather recommended I buy renters insurance. Turns out, it was great advice. I've had renter's insurance for nearly five years, and the one claim I made offset all the premiums and then some.
What Does Renter's Insurance Cover?
Many renter's insurance policies include several types of protection:
Personal Property: Your landlord's insurance doesn't cover your belongings. Renter's insurance will reimburse you if your belongings are stolen, destroyed, or damaged by a covered peril (such as an explosion or smoke damage) while in your home. Some policies also cover off-premises theft.
Additional Living Expenses: Your insurer may help pay for temporary housing and living expenses if you're unable to return to your rental because of a covered circumstance, such as a fire.
Liability: If you, a family member, or your pet accidentally hurt someone else or damage their property, liability protection could help pay for legal expenses and court-awarded compensation.
Medical Protection: Your insurance can help pay for medical expenses if a guest is injured while at your home.
I also learned that renter's insurance policy pays out in one of two ways.
Actual Cash Value: You'll receive the current value of your possessions. In other words, if you have a TV that cost $1,500 several years ago, you might only receive $1,000 if that's what it's worth today.
Replacement Cost: You'll receive enough money to buy the same, or similar, items if yours are damaged, destroyed, or stolen.
What's Important to You?
While I didn't think much of it at the time, liability protection could be the most important component of renter's insurance for someone with only a few possessions. A fire could have destroyed everything and cost me maybe $10,000. (I didn't even have a bed frame at the time.) But, if I accidentally started a fire that spread throughout the building, I could be on the line for much more than that. However, it's hard to imagine those scenarios. What I thought about while shopping for renter's insurance was someone breaking into my apartment or robbing me while I walked to work. I wanted to know that if I left the house with my phone and laptop, I'd be financially protected if something happened.
With this in mind, I looked for a replacement cost policy that covered off-premises theft and had a small deductible. I was living with a girlfriend in Brooklyn at the time, and we decided to put both our names on one policy and share the coverage. We went with the lowest deductible we could find, $250 per claim, and set the personal property limit high enough to cover all our possessions. Even then, the premiums were only $162 a year—less than $7 a month for each of us.
Making My First Insurance Claim
Several years later I was living in Queens and paying for a policy on my own ($134 a year). I renewed my renters insurance every year, but insurance can be odd because it's one of the few things that you pay for and then ideally never have to use. However, in July 2013, my luggage was stolen from a car while I was visiting California for a wedding. I still had my wallet and phone, but my suit, dress shirt, shoes, laptop, toiletries, and everything else was gone—in all, about $2,100 worth of possessions.
The next day was a frenzy. I made a list of everything that was stolen and called my insurance company to start the claim process. I also had to rush and buy basics, like a toothbrush, as well as new clothes for the wedding that evening. In the end, it turned out to be a great trip in spite of the theft. When I returned to New York, I continued to replace what was stolen and send receipts to the insurance company. My laptop was a little tricky because technology changes so quickly and an identical laptop wasn't available. With the insurance representative's approval, I got an even better brand-new machine that cost the same amount as my other one had when it was new. Overall, I was surprised by the simplicity of the process. Even before I bought everything, the insurance company sent me a check for about $1,950 ($2,100 minus my $250 deductible) and settled the claim.
My Premiums Went Up, But I'll Keep Renewing
When my policy was up for renewal, the insurance premium jumped from $134 a year to $198 because of the claim. I gladly agreed to the increase. About a year later I moved to Oakland, California. I compared quotes from a few insurers, but with a recent claim and wanting to keep a $250 deductible there were only a few options. I've stuck with the same company, although again the premiums rose and I now pay $268 a year. It's equivalent to about $22 a month, a little expensive for renter's insurance, but reflects where I live and my prior claim.
Insurers often offer different discounts, which can help make coverage even more affordable. I get a 5 percent discount for having protective devices, such as a fire extinguisher, at my house. I also avoid monthly installment fees by paying the entire year's premium upfront. If I don't have a claim for three to five years (July 2016 marks three), I may be eligible for an additional 10 to 20 percent discount. I'm not eligible, but many insurers also give a big discount if you buy auto and renter's insurance from them.
In the end, I look at the big picture and can't help but feel I made a good decision—and thank my grandpa. The total cost of my insurance premiums for the last five years is $919, less than half what I received from my one claim. That experience is enough to convince me to renew my policy every year, and tell friends to buy their own.