July 30, 2012
by Lila Quintiliani, AFC®
Military Saves Assistant Coordinator

There are some topics in personal finance that can be terribly exciting (Buying a house!  Investing in stocks!), but then there are others that are about as thrilling as watching paint dry.  Insurance falls in to the latter of the two categories, but it is a vital part of your financial safety net.  And really, you can’t get to the fun stuff until you have covered your bases with the boring stuff first.   When I teach classes on basic personal finance, people’s eyes glaze over when the subject of insurance comes up, yet many military folks either don’t have any type of insurance on their belongings, or are carrying vastly insufficient coverage on their things.

Why do I need renter’s insurance?  I don’t have anything really valuable. You may not have diamonds and Impressionist paintings, but if you started adding up how much it would cost to replace all your stuff, you might be surprised.  Even if you are a single servicemember living in the dorms or barracks, think about your clothing, your blurays, your gaming system, your iPod and your smart phone.  Would it be painless for you to take a chunk of cash out of your bank account and replace them?  One other thing that most people don’t realize – if you have your iPad in your car and it gets stolen, it’s usually not your auto insurance that would cover the loss, it’s typically your renter’s or homeowner’s policy.  Oh, and if a guest happens to get injured at your apartment, they can actually sue you.  Most renter’s policies carry personal liability coverage.   So yeah, you do need renter’s insurance.

Why do I need renter’s insurance if I live in government housing? I get this question a lot, too.  Coverage on items varies from installation to installation and may depend on whether the housing is privatized and which developer maintains or owns it.  Even if there is coverage, it’s limited, and it is only for the actual, depreciated value of the item.  Not the replacement cost of the item.   And if you rent a  civilian apartment or house, even if the owner/landlord has a policy on the property itself, that doesn’t cover your personal property.

What should I look for in a policy? There are two main types of policies (and the exact coverage may vary from state to state).  The Broad Form is the most common type, and it covers the value of your possessions against specific events named in the policy and usually has personal liability coverage as well.   As with homeowner’s policies, most renter’s insurance does not cover damage from floods or earthquakes.  The Comprehensive Form has higher personal liability limits, but is usually more expensive.  You also want to have a rough idea of the total value of your personal property and you will need to choose between a policy that includes replacement costs or just pays you the actual cash value of the item.   Military OneSource has a good discussion of the types of policies and coverage.

How can I afford renter’s insurance? The good news is that renter’s policies are usually less than $20 a month, and you can sometimes get a discount if you “bundle” your renter’s policy together with your automobile insurance.  I had one airman tell me that he got such a huge discount when he bundled his policies that it essentially paid for his renter’s insurance.  Burglar alarms and other safety devices may also qualify you for discounts.  Shop around for the best rate.

Insurance isn’t exciting, but, along with an emergency fund, it’s a vital part of your safety net.

For more information:

Purchasing Renter’s Insurance When You’re a Servicemember (Military OneSource)

Emergency Preparedness – Are You Ready Financially for an Emergency? (Military Saves)

Ways to Lower Insurance Costs (Insurance Information Institute)

Ten Things to Know About Renter’s Insurance (Financial Highway blog)

 

 

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