Category: property insurance

Tenant’s Insurance: Why You Need It

There’s a common misconception floating around that if you’re a renter, you don’t need property insurance. Often times when we advise a client they should have a tenant’s package, a common rebuttal is “I’m not going to bother. My stuff isn’t worth anything.”

The reality is that tenant’s insurance is about more than just covering your stuff. Below you’ll find a few good reasons to purchase tenant’s insurance.

1) Covers your belongings

Tenant’s insurance obviously covers your personal effects. As far as the famous argument “my stuff isn’t worth anything,” if you lost everything in a fire right now, are you in a financial position to replace it all yourself? Think about all your clothing including items like shoes, coats, and hats. Personal accessories like your computer and phone. What about household items? Dishes, kitchen utensils, towels, sheets, blankets. And don’t forget about the fun stuff like sports equipment and your hobbies!

All these things that you use day to day have value and, while their financial value may be individually insignificant, combined it all adds up. Most of us aren’t in a financial position to replace our belongings if we lost it all today. With tenant’s insurance, you can rest easy knowing your belongings are covered.

2) Offers legal protection

Let’s say someone comes into your apartment. They trip over the edge of your area rug, fall and injure themselves. Next thing you know, you’re being slapped with a lawsuit holding you financially responsible for their pain, suffering and any incurred medical costs.

Ultimately, tenants are responsible for any harm that may be caused to anyone visiting their rental unit. If you have a tenant’s package in place, your personal liability coverage would kick in to defend you against this lawsuit. Without this coverage however, it’s up to you to cover these legal costs on your own.

3) Covers additional living expenses

Now let’s pretend there’s been a fire in your rental unit. You’re forced to find housing elsewhere while it’s being repaired. Not to worry though. If you have a tenant’s package you’ve got coverage for these extra living expenses incurred while your apartment is under repair. This would include expenses such as hotel bills, restaurant meals, and any incurred moving costs.

4) It’s inexpensive

Tenant’s packages are relatively inexpensive especially considering the coverage and peace of mind they provide. A typical premium usually sits around $25 per month depending on the location, construction of the dwelling and the required contents limit.

Contact your broker today to find out more about how tenant’s insurance can protect you. It’s a small policy that has a huge impact.

Spotlight on Special Limits of Insurance

All property insurance policies have certain limitations or exclusions that policyholders need to be aware of. Unfortunately, most policyholders simply skim over their policy and tuck it away in a drawer somewhere.

Now that the holidays are fast approaching, we wanted to bring the “special limits” commonly found in personal property insurance policies to your attention.

What are “Special Limits”?

A “special limit” is the maximum amount that an insurance company will pay in the event of a loss for a specific type of property. Though not an exhaustive list, below are some examples of the types of property that commonly carry special limits are:

Jewelry, watches, gems, fur garments and garments trimmed with fur
Collections of coins, money, tokens, or stamps
Collectibles such as sports cards, sports memorabilia, comic books, etc
Silverware, silver-plated ware, gold ware, gold-plated ware and pewter ware
Books, tools and instruments pertaining to a business
Securities, books of account, deeds, evidences of debt or title, letters of credit, notes other than bank notes, manuscripts, passports, tickets and documents or other evidence to establish ownership or the right to claim a benefit
Money, bullion, or cash cards
Golf carts, lawn and/or garden tractors including their attachments and accessories
Watercraft, their furnishings, equipment, accessories and motors
Computer software
Antiques
Bicycles and related equipment
Spare automobile parts

Reviewing your Policy

Each insurer is different. It’s important that you take the time to read through your policy including the actual company wordings. This may seem like a daunting task. The wordings are long with very small print, but its an important exercise that will give you a better understanding of what coverages you have – and you may even discover some coverages you’re missing.

If you do review your policy and find that you want to insure any of the “special limit” items for more than the specified amount, be sure to ask your broker if you can purchase a higher limit by scheduling the item onto your property policy.

As always, if you’re unsure, contact your broker today to find out about the limitation and exclusions on your policy. Don’t wait until there’s been a loss to find out you don’t have the coverage you need.

Clarifying the Co-Insurance Clause

The Co-Insurance Clause is a common clause found on property policies that many policyholders aren’t aware of. It’s important because it affects the amount payable in the event of a claim.

The clause states that the policyholder must purchase an insurance limit equal to or greater than a certain percentage of the property’s total value. This percentage typically ranges from 80% to 100% depending on the insurance company and the type of property being insured.

For example, let’s say we have a farmer whose barn’s true value is $500,000. Her policy has a co-insurance clause of 80%. This means she is required to insure her barn for at least 80% of its true value. Since the barn’s true value is $500,000, the minimum required limit of insurance is $400,000.

If a policyholder insures their property for less than the specified co-insurance percentage, they will face a financial penalty in the event of a loss.

Continuing with our farmer, let’s say she has only purchased an insurance limit of $250,000 for her barn, despite the minimum requirement of $400,000. To make matters worse, a small fire has now broken out and damaged the barn. The loss amount is $200,000.

To determine how much the company will payout on a loss, the following formula is used:

Limit Purchased x Loss Amount = Amount Payable
Limit Required

If we take the farmers information and plug it into our formula:

($ 250,000) x $ 200,000 = $ 125,000
($ 400,000)

This means the insurance company will pay $125,000 of the $200,000 loss, and our farmer is responsible for the additional $75,000. Had our farmer purchased a minimum of $400,000 insurance for her barn, the company would have paid out the full $200,000 to cover the loss.

All policyholders should review their policy to determine what co-insurance percentage is stated and whether their property is being insured to its true value. Don’t wait until you’ve had a loss to find out you’re not properly insured. Call your broker today.