If you rent a house, apartment or condo, you need to protect your possessions from damage or theft. While your landlord is obligated to hold insurance on the building, if anything should happen to your belongings, your landlord is not responsible. If you don’t have insurance, replacing your belongings could land you in debt, eat up all your savings, or even worse leave you with nothing. How many times have you heard about devastating apartment or house fires where tenants had no insurance on their belongings and lost everything?
There are actually two types of tenant insurance a renter should consider. Liability insurance protects you if you or your guests cause damage to your building or a neighbouring building. If you don’t have this type of coverage, you could be sued and be on the hook for big bucks. Liability insurance also covers you if someone is injured in your home and sues you for damages. For example, if someone trips on a throw rug and breaks an arm, they could sue you.
Contents insurance allows you to replace or repair your belongings if they are lost or damaged. You would be surprised at how much you own is worth. Think about it. What if you own an iPod, cell phone, television, computer, stereo, DVD player and DVDs and CDs? And that doesn’t include your clothes. And what if you bought your computer or flat screen TV on credit? You still have to pay the lender back even if the goods are destroyed or stolen. You may think you don’t own much, but it can add up. There are different options with contents insurance. You can be insured in case of “named perils” or on an “all risk” basis. “Named perils” policies cover only the events named in the policy such as theft or fire. While “all risk” policies cover a more extensive list.
In addition, if your home is uninhabitable for any period of time, you could get a policy that will cover your living costs while you are displaced. You should talk to your financial advisor or insurance agent about the different between replacement cost (which includes depreciation for old assets) and full cost (replace with new item). Of course, costs vary depending on the type of coverage you get. Your financial advisor or insurance agent should be able to ensure that you get the coverage you need to protect your assets.
Here are some tips from the Insurance Bureau of Canada on how tenants can protect their possessions:
- Make a list of your possessions including cost, date bought and receipts and warranties
- Keep this information in a separate safe location like a fire-proof box or a safety deposit box at your bank
- Take pictures of valuable goods
- Review your inventory list annually (visit www.icb.comfor an easy-to-use inventory form)
- Talk to your insurance agent about the need to insurance special items such as jewelry, bicycles or computers
Terri Williams, CFP®, is Vice President, Editorial Services and Production for DundeeWealth Inc.