Insurance for tenants is a good policy

When insurance of all kinds seems more expensive all the time, it's curious that one of the more reasonably priced insurance products is also one of the least used. Such is the case with tenants insurance. For a few hundred dollars or less, renters can protect their furniture, stereos, VCRs, and clothing from fire and theft. But a lot of renters apparently don't feel they have enough property worth protecting.

In a recent survey conducted for the Insurance Information Institute, an industry trade group, 65 percent of those responding did not have tenants insurance. The reasons for this are somewhat of a mystery even to officials at the institute. But a possibility seems to lie in the age and economic situation of many renters.

Often, says Doris J. Handy, assistant manager of consumer affairs at the institute, renters are young people fresh out of school and starting their first homes. They may look around their new apartments, see a collection of odds and ends left over from college or picked up from relatives and garage sales, and decide they don't own enough to bother with insurance. Also, it seems like just one more expense.

``A lot of young people start out on a pretty tight budget,'' Mrs. Handy notes. ``They don't take time to add up all the things they've got. But if you have a TV, a VCR, and stereo equipment, you can have over a thousand dollars' worth right there.''

Add in clothes, kitchen appliances, and quickly gathering furniture, and it doesn't take long to reach a $2,000, $3,000, or $4,000 level.

Another reason renters sometimes give is the belief -- a mistaken one -- that the landlord's policy covers them. The landlord's insurance only covers damage to the house or apartment building itself and to contents the landlord owns, like hall or lobby furniture, stoves, or refrigerators. Such a policy does not cover tenants' personal belongings.

Protecting your belongings, then, is the purpose of tenants insurance. With most policies, you may end up buying more coverage than you actually need, because insurance companies usually won't write it for less than $8,000 or $10,000. But this leaves some room for later acquisitions.

At Aetna Life & Casualty, for instance, the smallest policy is for $10,000 of coverage, says Michelle Woodbridge, a spokeswoman for the Hartford, Conn., underwriter. Premiums for this coverage depend on the city and part of town you live in.

In Chicago, for example, premiums for $10,000 of Aetna coverage range from $95 to $135 a year. In Los Angeles, the range is $125 to $140 a year, and in Boston it goes from $150 to $160. This includes a $100 deductible, $25,000 worth of liability, and $500 for medical payments should someone be injured in your apartment as a result of a hazard you placed there.

There is also some coverage for interim living expenses. If a fire in your building forces you to stay in a motel, the insurance company, within limits spelled out in your policy, will pay the difference between that and your usual living expenses. It might be a good idea, then, to occasionally keep a record of these normal living expenses, including rent, utilities, and food, to provide some basis for comparison.

Comparison would also be a good idea when shopping for tenants insurance. A $140 bill for $10,000 in coverage works out to $14 per thousand. But Mrs. Handy says one independent agent she knows charges $75 for $8,000 of coverage in upstate New York and $110 in New York City. That $110 represents a cost per thousand of $13.75. Calling several agents in your area will probably turn up a variety of rates, coverages, and policy features.

When making these calls, ask about ``replacement cost endorsements.'' You will almost certainly pay a little more for this coverage, but if you are insuring items that would be expensive to replace today, it's worth considering. Without it, all coverage is based on the depreciated value of your property.

Let's say you bought a color television set for $500 five years ago. Today it might be worth only $200, so that's all you would get from the insurance company without replacement coverage. With it, you can go out and buy a new, comparable model TV at today's prices.

Getting to do that, however, will require some additional premium. With Aetna, you first have to raise your minumum coverage to $15,000, then add 40 percent to the new premium.

If, for instance, you would ordinarily be paying $140 for $10,000 of coverage, raising it to $15,000 would increase the premium to $210. Adding the replacement cost endorsement would boost this figure to $294, more than double the original premium. But if you have a lot of furniture and home entertainment gear that would be expensive to replace, $294 may still look cheap.

To find out how much insurance you need, an inventory of your belongings is a good start. Several major insurance companies have booklets or forms they can give you to use for taking inventory. Or you can call the Insurance Information Institute at 800-221-4954 and ask for ``Taking Inventory.'' This and another leaflet, ``Tenants Insurance Basics,'' are both free.

If you would like a question considered for publication in this column, please send it to Moneywise, The Christian Science Monitor, One Norway Street, Boston, Mass. 02115. No personal replies can be given. References to investments are not an endorsement or recommendation by this newspaper.

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