Renters Insurance Vs Condo Insurance, Is there a difference?

Renters Insurance

News reports of apartment fires often include tragic stories of renters who have lost everything because they weren't insured. Your landlord does not provide insurance for your personal property. Having all your personal possessions destroyed in a fire or other insurable event, without coverage, is a tragedy that does not have to happen.

To protect your belongings, you should consider purchasing renter's insurance, also known as "tenant's insurance." The renter's policy may be used to provide coverage for your personal contents located in the property that you occupy. Coverage is also provided for loss of use, personal liability protection and medical payments to others.

Coverage generally Provided under a Renter's Policy:

• Coverage C - Personal Property  - An amount, designated by the insured, subject to a minimum as determined by your insurance company
• Coverage D - Loss of Use  - 20% of Coverage C
• Coverage E - Personal Liability  - Generally subject to a minimum of $100,000
• Coverage F - Medical Payments to Others  - Generally Subject to a minimum of $1,000

Condominium Insurance

Condominium insurance covers the unit-owner and is similar to renters insurance. Coverage includes interior damage to your unit, personal property and improvements. Loss of use is generally limited to 40 percent of the contents limit. The condominium association generally purchases insurance for the building structure and common areas, such as corridors. Loss Assessment Coverage can be an important policy provision for you. It covers you for certain assessments the condominium association makes. However, you should check if it covers you for earthquake losses and how much it will provide you in the event of an earthquake loss. You should also carefully analyze the type of insurance your association has and how it would affect you in the event of a loss. Most condominium association policies cover the common areas and walls.

What Limits should I set on My Policy?

The "dwelling" limit should be the amount it would cost to replace your home. This may have nothing to do with the purchase price or the current market value of your home, as homeowners insurance does not generally cover the land value of your insured property. Your insurance policy is not governed by the real estate market, but by the cost of the materials and labor involved in rebuilding your home. Insurance companies have formulas that they use to evaluate the replacement cost of your home. Since the formulas developed are unique for each company, different insurers may suggest or require different limits of coverage for your dwelling limit. 

The following information can assist you to determine if the limit set by your company accurately reflects the price it would cost to rebuild your home in the event of a total loss:

• Contact your agent or broker for assistance in evaluating your dwelling limit. In order to prevent a "he said, she said" situation from arising in the future, you need to document your discussions and inquiries in writing.
• Review your dwelling limit initially and upon renewal. Discuss any changes to your home in writing to your agent, broker, or insurer that may cause your dwelling limit to increase or decrease.
• Know the replacement cost of your home. Be familiar with the building materials that make up your home including the construction type and any special features. 
• Stay informed as to the current building costs in your area. Contact local general contractors and ask what the current price per square foot is for a home similar to your own.
• Keep accurate records of updates, renovations, and improvements to your home. Save receipts and samples of materials used when possible and contact your insurance agent or broker to increase the dwelling limit when appropriate.
• Contact your agent, broker, or insurance company to request a comprehensive inspection of your home if you believe your policy limits may be inadequate.

If you believe that your dwelling limit is undervalued or overvalued, and you have submitted documentation in writing to your agent, broker, or insurer to raise or lower the limits and your request is refused, then contact the DOI.  

The "contents" limit is generally around 50% of the dwelling amount; however, this is a guideline only, as the most competent source on the replacement value of your personal possessions is you. Be sure to take into account all of your personal property when calculating the contents limits. Read and understand the limited coverage amounts for specific types of personal property such as:

• Jewelry
• Fine arts
• Silverware
• Antiques
• Collectibles
• Firearms
• Computer hardware and software
• Business personal property
• Money

The limited coverage amounts for specific types of personal property are not separate limits in addition to the contents limit. These limits are included in the overall contents limit and represent the maximum paid out for that specific type of personal property. Therefore, it is very important to add an endorsement (sometimes referred to as a "rider" or a "floater") to coverage which specifically schedules and takes into account the value of personal property that you may own above the special limits. Contact your agent or broker to discuss how to adequately cover any personal property that is valuable, falls above the limits, or is in any way out of the ordinary. Also, make sure to take into account commonplace household items when calculating your contents limit. Often, people concern themselves only with big ticket items purchased for use in their homes and neglect to account for all the many things you need to run your household and enjoy your home such as small appliances, kitchen utensils, linens, window coverings, and sundries. Remember, personal property also includes clothing, shoes, accessories, and personal items.

Two major problems suffered by homeowners on their Residential Property/Homeowners insurance policies in the Northern and Southern California fires were:

(a) Many of the dwellings were under-insured, i.e., insured for amounts inadequate for rebuilding. Insurers sometimes refer to this as inadequate insurance-to-value.

(b) The problem of increased cost of construction was evident in many situations. When rebuilding, homeowners have to comply with new building code requirements. In some instances the difference between the dwelling limit and the code upgrades was a significant amount. Also, the extreme heat of some fires (and some new building code requirements) necessitated building new foundations along with appropriate debris removal. This is a situation that can be easily overlooked when determining building limits.

An important part to owning any property is protecting the property to the best of your ability. Homeowners insurance is a vital component to the protection of your property. By knowing and understanding the coverage and limits of your policy, and by making sure that values are current, your greatly add to you and your family's peace of mind in any loss situation.