We have been fortunate to escape damages from major hurricanes for the past few years. Hurricane Micheal’s devastation to Panama City and East should be a wake-up call to all of us living in Florida. Whether you are an owner of rental property or a tenant, it is important to understand your need for insurance protection. Living in an area where hurricanes, tornadoes, or floods are possible, it is risky not to understand insurance coverage as it applies to tenants.
Although there is some advertising promoting renter’s insurance, we find that most tenants are unaware of its availability or don’t understand their liabilities and the importance of protection for their personal property. The low cost, roughly the cost of a large pizza per month, is a smart investment which could off-set a substantial loss if a disaster, accident, or theft occurred while renting. There are many additional situations involving insurance and renting that should be explored.
Take an inventory of all of your possessions including clothing, appliances and furniture. Don't forget jewelry and pictures. These items can be expensive to replace. It is a good idea to take pictures or a video of your property to document it. Put a replacement value on everything you own to make sure the amount of renters insurance you purchase will cover their loss.
Another important part of renter's insurance coverage is liability. If a tenant causes a fire or lets the tub overflow resulting in a loss, they could be held liable. Many times the owner's insurance policy will cover the loss for an owner, but their insurance company will go after the tenant to recover the loss. Renters insurance will protect the tenant from this situation. Liability coverage also protects a tenant from accidents or the cost of an injury to an invited guest.
Insurance companies offer several types of coverage and it is important to investigate discounts for items such as deadbolts, sprinkler systems, and security. If you purchase insurance from the same company that has your auto or other insurance you could receive a discounted rate. Policies can be either for cash value (which usually depreciates an items value) or replacement cost (allowing for the purchase of a new item). Replacement coverage usually cost more but can result in a quicker and more satisfying recovery from a loss.
Tenants must understand while the owners of a rental property have insurance on the building, any personal items belonging to the tenant are not covered by the owner's policy. It is estimated that over 70% of tenants do not have rental insurance. This is surprising especially in an area subject to hurricanes.
Homeowner insurance rates continue to climb in Florida. An owner or tenant should review their coverage to meet changes in value and not let coverage lapse. Most insurance companies now have large deductibles for hurricane damages caused by a named storm. It is wise for landlords to set aside funds to cover the deductible in the case of a major loss. Insurance companies also are dropping older homes and those that are of higher risk. It is not advisable to put in frivolous claims which could trigger a rate increase.