insurance

Condo or rental, it's still yours to protect

Just because you don't own the roof over your head doesn't mean you don't need protection against the storm.

Many people think their condo association, co-op board or the landlord's insurance will cover them and it's a good place to save some dough.

Wrong.

If the condo roof blows away in a storm, the association will fix it, but they won't replace your rain-wrecked paintings or the family heirloom quilt that blew away with the roof.

If you want protection against accident, damage, theft or other setbacks that could bring financial ruin, you'd better take care of it yourself.

If the day comes that you need it, condo or renters insurance will be the best purchase you ever made.

Typically, insurance covers damage to the dwelling and your possessions from certain named dangers, such as fire, lightning, explosion, windstorm, hail, riot, civil disturbance, theft, vandalism, smoke, falling objects and damage from aircraft or vehicles.

"This is called Broad Form insurance," explains personal insurance specialist Lisa Smith, of the independent agency KPD Risk Management in Springfield, Ore.

There's also Special Form insurance that covers the same risks of damage to personal property that you list in detail.

Covering your personal property is something that always should get special attention in a condo or renters policy. While the cost of carpeting, furniture and appliances is generally simple to calculate, things like jewelry, electronic equipment, computers and antiques, for example, can be very subjective. Anything of particular value should be discussed with your agent, appraised if necessary and listed in your policy.

Third, a Comprehensive Form covers all risks, protecting your property against everything that is not specifically named. It covers more eventualities and it's more expensive.

"Everybody needs insurance, but it's difficult to generalize about everybody's needs in different states with different laws," Smith says.

Condo Insurance

Owners of co-ops and condominium units face some specific insurance needs and problems.

"A condo owner needs to be aware of what the condo association covers," says KPD's Smith. "The rules are very similar for co-op owners, who are shareholders in the co-operative with the right to live in their unit."

Almost all associations have a master policy insurance that covers you for the actual structure and common elements -- areas such as a swimming pool or tennis court -- owned by all unit owners. The association documents and the master policy spell out very specifically where common areas end and where your unit starts. In some cases, for example, your unit may start inside the wallboard. In others, the wallboard may be considered part of your unit.

In a typical case, let's say your bath overflows and damages the ceiling in the apartment below.

"You may not even have to file a claim," says Dennis Howard, founder of the Insurance Consumer Advocate Network, in Branson, Mo. "The neighbor's insurance may cover it, or the condo association's master insurance policy might do it, too." It all depends on the condo documents and the master policy.

Renters insurance

Whether you rent an apartment, duplex, townhouse or house, your landlord's insurance covers losses or damage to the building itself. To protect your personal property you'll need a renters policy to repair or replace property that is stolen, damaged or destroyed.

Basic policies provide for payouts up to $4,000, but policies can be structured according to your individual needs. Coverage generally includes loss of merchandise used for your business, lost cash, missing or destroyed valuable papers, and for the theft of items such as watches, jewelry or furs.

Your renters policy also covers you when you travel, usually up to 10 percent of the value of your policy, and also offer liability coverage (with associated legal fees) up to about $25,000.

But some renters don't need insurance.

College students, for example, are usually covered by their parents' or guardians' homeowners policies while living away from home, as long as they are living on or close to campus.

Their personal property is covered to the same 10 percent cap of their parents' away-from-home personal property limit, while their liability for injury claims by others is covered up to 100 percent of the limit on the parents' policy.

The cost of basic renters insurance is based on the square footage of the rental property, so if you have unusually valuable or rare items, antiques, jewelry or fine art, you need to list them specifically. You may first want to have them appraised.

Communal living can be risky

If you live with a lot of other people, you probably should tell your insurance agent and get extra coverage.

"Living in a college dorm or commune is regarded as high risk by actuaries and insurers," says Howard. "Too many people living in the place put your property at risk of theft or damage, and often even the parents' homeowners policy won't cover that."

Friends who share an apartment often are not covered by each other's renters policies, either.

"Renters insurance is really designed for singles and traditional families," explains Howard. "Some companies do allow multiple roommates to be listed on a single renters policy, but make sure everybody's name is listed, and that you buy enough insurance to cover everyone's property."

If you change roommates, you'll have to change the names and update the policy. The same goes for unmarried couples. They sometimes can buy one policy, but it varies from state to state.

Here's more basic advice on insurance, whether for condo owners or renters:

  • Carefully consider the limits on coverage, warns Howard. Know what you are buying and what you can expect if disaster happens. Don't find out the hard way, after the loss has been incurred.
  • Get replacement insurance, not actual cash value coverage, which is basic and cheaper. With replacement insurance, your goods will be replaced at today's costs. With actual cash value coverage, you will be reimbursed what you paid, minus 'depreciation' because they're considered used. (Think what a used computer is worth.)
  • Don't forget to include liability coverage. If an electric light or romantic candle sets your home on fire, you could be responsible. The landlord or condo association might well have insurance coverage, but if you're negligent, they could come after you.
  • Consider coverage for what's called 'loss of use,' which covers the costs of a motel or other temporary accommodation if you're forced out of your home by, for example, a fire. It's usually limited to 20 percent of the personal property limits on your policy. If you had $20,000 worth of personal property coverage, your loss of use payout would be up to $4,000.
  • Policy costs, coverages and limits vary enormously by region, company and client. To help control costs, ask your insurance company what discounts are offered for such things as installing smoke detectors or dead bolt locks, insuring your home and your car with the same company, and living in a non-smoking household. Raising your deductible helps, too. A higher deductible -- the amount you pay for yourself before the insurance kicks in -- can save up to 30 percent of the annual premium you pay.

One more thing: Sometimes it's better to pass up insurance money, even if you have a valid claim. "Sometimes it just doesn't pay to make a claim," explains Smith. "You should think of insurance as protection against catastrophic events, not as an umbrella cover for minor losses."

Two or three small claims could cause your insurer to cancel you or raise your rates. Claims remain on your insurance history for three to five years, so an insurer who sees you have a bad track record won't want to take you on. A good rule of thumb: If it's under $500, don't file a claim.

Paul Bannister is a freelance writer based in Oregon.

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