Requiring renter's insurance
Q: As of 12/01/2000, our apartment management company is requiring the tenants to provide renters' insurance. This is the first I've heard of such a thing. How can we be forced to provide coverage for our own property? I understand the cost is minimal, but it's the concept that confuses me. Can you provide some light on the subject?

A: Well, that's a new one to me too. It's nice that the landlord wants to play big brother. However, I do get a fair amount of questions asking why the landlord isn't responsible if someone's property is damaged because of a leaky roof or something similar when renters' insurance would easily cover this situation.

Renters' insurance itself is a fairly simple policy. It's similar to homeowners' insurance except that it does not protect the building structure itself. Renters' insurance provides protection for your own personal property and liability insurance for you.

Most policies protect your personal property from theft or accidental damage. If someone broke into your apartment and stole your TV, renters' insurance would cover the loss. If your upstairs neighbor overfilled his tub, causing a leak that ruined your home theatre equipment, renters' insurance would cover the loss. Some policies may not provide coverage for losses from floods or earthquakes. So, if you have a policy or if you're shopping for a policy, check to be sure that it doesn't exclude damage from disasters common to your area such as hurricanes, tornados, or earthquakes.

Most policies also protect you by providing liability coverage. For example, a drunk party guest may try running through your sliding glass door. When he injures himself on the sharp glass, he may sue you. Or, an elderly neighbor may trip, fall and injure themselves when your child puts his tricycle right in the middle of your common entryway or at the bottom of the stairs. Liability insurance will protect you in these situations by paying for a lawyer to represent you and paying any damages for which you are determined to be responsible. Lawsuits abound these days so having this kind of liability insurance is just playing it safe on your part.

And, as insurance policies go, renters' insurance is pretty cheap. Homestore™ apartments and rentals has a section of its site that provides more detailed information about renters' insurance including quotes. But, just to give you an idea, my renters' insurance premium for this year is $207. At about $17 a month, that's a small price to pay for protecting my property and myself from losses. I'd be surprised if you couldn't find a cheaper policy too. Premiums are based primarily on the total coverage and your location. Insuring your property for $10,000 total coverage in a rural area will cost you much less than insuring your property for $25,000 total coverage in an urban area more subject to risks such as theft. I highly recommend that every renter have renters' insurance.

The purpose of a security deposit
Q: This is my first time looking for an apartment. Do all landlords require a security deposit? How much is it usually? Some of the ads say "plus security" and some don't. It's very confusing.

A: What's a security deposit? A cynical renter will tell you it's just a way for landlords and owners to charge their tenants more money. Actually, it's supposed to protect or "secure" landlords in the case of a tenant who fails to pay rent. It's also supposed to reimburse the landlord for any damage to the rental unit or any necessary replacement of rental unit property (in case you decide you need that nice hanging light over the breakfast area when you move). Finally, it's also supposed to reimburse the landlord for the cost of any cleaning necessary to put the premises back in the condition it was. The security deposit is not supposed to reimburse the landlord for "ordinary wear and tear."

Most renters will tell you that no matter how hard you take care of a rental unit and no matter how hard you clean when you move out, a landlord will find things to deduct from your security deposit.

A security deposit might also simply be called last month's rent instead by some. Some landlords require a security deposit and last month's rent as well. In many states there is no limit on the amount of security deposit a landlord can charge. But, in many other states, the landlord cannot charge more than one or two months rent as a security deposit. You'll have to check your state law for the specific limit applicable to your state.

But, almost without exception, landlord will require that you put down a security deposit up front to rent the apartment. Normally, at the time you sign a lease, you must pay any security deposit plus your first month's rent. Then, promptly after you move it, the landlord is supposed to give you a statement of any deductions from your security deposit and a refund of the remaining portion.

In another column, I'll try and provide some tips for the age-old problem of getting more of your security deposit back. So, watch my upcoming columns if you're interested.

Disclaimer
Information provided by Phil or Greg should not be construed as real estate or legal advice. State and local laws may vary, so please consult legal counsel in your area with respect to your individual situation.

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