Advice on Renter's Insurance

1. Yes
2. Premium is based on how much contents you have. (Jewelry and Fine Arts should be insured with a rider separately.
3. Chubb, its top of the line insurance.
(Read they pay claims extremely well with least amount of hassle)

A renters policy with Chubb, for $75,000 in contents, is about $925 with a $1K deductible.

One of many nice things with Chubb is if you don't own a car, and then you rent or borrow a car and get into a big fat accident, your liablity from your apt rental policy will follow you. This is better than the credit card you put down on a rental car, which will only pay to repair the rental car you damaged.

The Chubb liability will pay for the damage to the rental car, damage to the other cars you hit and defend you from a personal injury attorney who wants to sue you for $350,000 because you injured their client.

I don't have (m)any expensive things...
(largest items: plasma TV and the watch I wear!)
So I guess I will do the minimum.
The part with the rental car: do you have to specify that or is it standard in their policy?
Thanks again!

1) yes.
2) I live in a 1-br "luxury" rental and pay about $230 per year from State Farm. I have a fairly high deductible by choice and coverage up to $40k. My policy comes with a liability component, so if a guest is injured in my home and sues me I am covered up to a certain amount, although I can't recall this second what that amount is.
3) Have not needed to file a claim under this policy; it's a basic service that includes coverage away from home (like if I get my luggage stolen while traveling, not that I ever pack enough to need more than the deductible anyway).

You may be required to hold a separate policy for the watch. My renters' policy does not cover jewelry, furs, or watches, which is fine since I don't really own much of the above. My Swatch with the dead battery is hardly worth insuring.

The part with the car, you just have to have $1M of liability coverage on the renters policy and it will extend to rented and borrowed cars in your possession less than 30 consecutive days, provided you don't own or insure a car in your personal name. The liablity component evnyc mentioned above is actually worldwide for accidental bodily injury, non professional libel and slander. However, Comparing State Farm and Chubb is apples to oranges comparison, with insurance, you get what you pay for, unfortunatley, most people have no idea what they've paid for until they have a big claim.

"I don't have (m)any expensive things... (largest items: plasma TV and the watch I wear!) So I guess I will do the minimum. "

Most apartment dwellers make this same mistake in thinking that they "don't have (m)any expensive things" when in fact they do.

Keep in mind that renters (and homeowners) insurance isn't just for theft, it's for fire or any other disaster that could potentially wipe you out.

If you left your apartment today and returned to find the building completely gutted by a fire -- and the only possessions you now have are what you left with on your person -- how much would it realistically cost to replace EVERYTHING?

More than you realize.

Speaking for myself, as a single apartment dweller, not even considering the big-ticket items like my expensive furniture, rugs, and electronic equipment:

-- Clothing. Seven suits at least $1000 apiece. Five pairs of jeans, $100 each. Ten pairs of shoes, conservatively speaking, $100 a pair. 15 dress shirts $100 a pop. Another 30 or so more "casual" shirts at $50 each. Ten sweaters, $100 each. Five pairs of slacks $125 each. Three blazers, $350 each. 15 pair of underwear, $10 each. Fifteen undershirts at $10 each. Fifteen pairs of socks at $5 each. Winter top coat $1500. All-weather top coat $500. Winter casual coat $750. Leather jacket $1200. 15 sweatshirts $65 each. Grand total $19,475 and I haven't even counted gym clothes or swim suits.

-- Kitchen. Complete set of pots and pans, at least $500. Le Creuset dutch oven $200. Set of knives $500. Complete set of stainless steel flatware $500. Blender, toaster, stand mixer, hand mixer, juicer, coffee maker altogether let's say $2000. Various cooking utensils (spatula, wire whisk, big spoons, etc.) $250. Complete set of dishes (service for 10) $1000. Baking supplies, including cookie sheets, cooling racks, cake pans, etc., another $1000 or so. Just for the basics we're now up to nearly $6,000.

That's $26,000 to replace just my clothing (for just one person), and kitchen supplies.

What about replacing what you have on the walls? Over the years, one at a time, you paid $200 or so just to frame your posters, prints, or pictures. Now you have an entire collection on the walls. For a dozen or so you're looking at $2500 replacement cost.

So far you've spent $30,000 to replace your apartment contents, and you still haven't yet replaced a single electronic item or even a chair or rug on which to sit.

It adds up. REAL fast.

Thanks Matt, couldn't have said it better myself. People only see the couch and TV and say $6K. The other thing is we're all shoppers and we like deals, however, when your putting back together an apartment in 30 days, you don't have time to find deals, you buy at full retail price.

Please, w67thstreet has a watch that costs $26K, and you brag about your clothing.

By the way $1K suits but only $100 shoes?

NPGS, I buy my suits at sample sales, $350, add in tailoring for another $100, if I bought them at Bloomingdales, I'd be close to $1K, and I wear $100 Florsheim shoes. I have two pair of Johnson and Murphy shoes, $400 a pair, they got wet, shrunk two sizes and now sit in my closet. Matt's got it right.

"By the way $1K suits but only $100 shoes?"

I was being VERY conservative with my numbers, and allowing for the averaging between the dress shoes ($250 per pair) and tennis shoes ($65 per pair).

Oh yeah, and we haven't even touched on your bed (frame,mattress, and box springs), bedding, pillows, linens, bath towels, hand towels, etc.

If you had to replace it all ... at least $5K for a complete bed, another $400 or so for sheets ... $200 for pillows ... $500 for various blankets and comforters ... $500 for a complete set of new towels and washcloths ... etc.

Let's just say another round ten grand.

The list really does go on and on and on.

For women it is even more expensive. My shoes and handbags alone would be $20k. This reminds me, I NEED to buy renter's insurance. lol.

Of course if all your receipts for all these things you own go up in the same fire that consumed the rest of your belongings, then what.... :)

Difficult if not impossible to save all receipts for your "stuff", but it is recommended to take pictures of everything - i.e. open your closet doors,kitchen cabinets, etc.,living room, bedrooms, and just take pictures of everything. May not show prices, but will confirm you've got those 40+ pairs of shoes!! LOL

One day I am definitely going to have to do that!!

Most of the stuff in your apartment you don't really NEED. If you had to replace the $400 sheets with $40 Kmart sheets, the world would not come to an end, you would not die.

What can I say? I live light. I don't have a ton of furniture, and could easily replace it all for $10k or less. $20k could keep me stylishly dressed for the rest of my life, even if I had to replace my two pairs of Louboutins.

Buy the insurance you need, but at least get something. Insurance is a competitive industry, and I see little reason to pay triple the price annually for a service I'm unlikely to ever need; others feel differently. Either way, it's a lot cheaper than having to refurbish the entire contents of your apartment after disaster strikes.

Just curious - anybody else have experience with Chubb and think they are worth the extra $$$? I'm willing to pay a little extra if it makes sense - I would like to hear what others think.

Also, if I don't own a car, does that Chubb policy cover damage over $1 million for autos as well as $1 to $999,999 or just the damage in excess of $1MM?

downtown1234 - Have Chubb - think it's very worth it.

Check out SE Thread Homeowners Insurance for a NYC Co-Op: How much?

Insurance is a bet that you hope you never win. Insure only for losses that you cannot afford to loose. If you have a $1M in assets, why insure your apartment for 75K? A liability only policy to protect your assets is well worth it. Not having health insurance can wipe you out. Loosing your 40 pair of shoes you can afford to replace. Same advice goes for purchasing insurance (or maintenance) plans on electronic devices, appliances, etc.

"Most of the stuff in your apartment you don't really NEED. If you had to replace the $400 sheets with $40 Kmart sheets, the world would not come to an end, you would not die."

That's not the point.

If you could live with losing everything and not replacing ANY of it, then by all means go without insurance.

I'm just suggesting that people who DO expect their renters insurance to replace *everything* in the event of a total wipeout are not being realistic in how much *everything* really costs to replace.

"Insurance is a bet that you hope you never win. Insure only for losses that you cannot afford to loose. If you have a $1M in assets, why insure your apartment for 75K?"

I doubt that anyone with a million dollars in assets would be RENTING in the first place ...

If you want to obtain and easy quote and get a Renters Insurance policy is less than 5 minutes visit the Assurant website and do so. www.rentersecurity.com They have a very user friendly website that you can play around with and get many different quotes without providing any information. I found the rates in NY to be super inexpensive for the coverages they offer, i.e. 20K in contents and 100K in Liability for $242 per year!

re: insurance - a lot of policies do not cover replacement value. Depreciated value only, and sofas, kitchen cabinets, etc. depreciate just like cars.

More expensive insurance will cover replacement cost, and will increase that annually.

Wow, some of the info on this thread is really, really bad... 1) If you bought a policy that has actual cash value and depreciates your contents at the time of the loss, save your money, that policy isn't worth the paper it's printed on. Some carriers will give you the actual cash value until you replace the item and then they will give you the difference to bring you up to replacement value after you have replaced said item. 2) Bystander, that statement is just flat out stoopid... I have clients that have $500M of net worth, $40M of hard assets on the ground to insure, and guess what, they insure the $40M, why, because they are not idiots and understand risk and calculated bets. You want to apply some logic here, take a high deductible, maybe you don't insure every piece of jewelry in your collection, or you apply blanket coverage which creates a hedge that you won't have a total loss of everything, but trust me, with $1M of net worth, I cannot afford to take a $75K-100K hit out of pocket. I don't know about you, but to net $100K, I have to make $200K before taxes. I drive a car, but I'm not giving out advice on how to replace an engine. 3) Unless your 65 years old and looking to downsize, you'll want to replace your stuff, with like and similar stuff, in fact, if I had dollar for everyone of my clients who not only replaces but then upgrades after a loss.....4) If you only have $20K of stuff, you live in a college dorm room and everything you purchased was bought at WallMart... ughh.... 5) Downtown 1,2,3,4 . Chubb is worth it, you won't know until you have a claim, but ask around, high net worth clients migrate to this carrier to buy themselves out of the pain and suffering of dealing with certain carriers that like to employ deny, delay and decline within their claims unit. The $1M of liability with Chubb, it pays from the first dollar if you are in an auto accident. Again, you need to select $1M minimum liability on NY Policy, you can't own or insure an auto in your personal name, and a rented or borrowed car can only be in your possession for less than 30 consecutive days.

"I found the rates in NY to be super inexpensive for the coverages they offer, i.e. 20K in contents and 100K in Liability for $242 per year!"

As in all things, you ultimately get what you pay for.

Be careful that coverage isn't similar to what Tallisman just described ("cash value" that depreciates your contents at the time of loss, which is essentially worthless, since the "cash value" of just about everything you own -- and would need to be replaced -- would be pennies on the dollar. Think of selling your entire apartment contents at a yard sale, then using those proceeds to turn around and try to buy it all back new.)

And as I extensively pointed out above, unless you're a homeless person, you're going to have at least $25,000 worth of CLOTHES ALONE to replace in the event of a disaster. But of course, if you DID lose all of your clothes in a disaster, this cut-rate insurance would only pay out the depreciated cash value of those clothes (the fair market value of them at a thrift store, which works out to roughly two dollars or so per item).

Good luck with that.

The coverage I spoke of was an example and I understand that not all renters are alike. You can quote content coverage up 90K. This coverage is replacement cost and will replace the items at today's value not the depreciated "thrift store" value. Talisman, not everyone in NY lives like you do and there has to be options for the "middle class" renter also. I live in an apartment in the city, pay over 2K per month but I cover my contents up to 50K.. and no, my items do not come from Wal-Mart (sic). I mentioned this site because my community requires proof of insurance and this company comes highly recommended.

I'm going to agree that it doesn't make sense to pay for insurance if you're can comfortably replace what you're insuring. Insurance companies are profit-making entities so on average you lose money paying for it. Of course, if you can't comfortably replace the contents of your apartment, it absolutely makes sense to get decent insurance (including getting replacement value coverage).

I find some of these conversations amusing.

Matt – clothing depreciates (goes out of style) in a year or two. Of your 30 casual shirts how many do you really still use. Shouldn’t most of your wardrobe go to the thrift shop anyway.

Electronics – that flat screen TV is worth a small fraction of the 5-8 K you may have paid for. The furniture needs replacement or re-upholstering or re-finishing every so often.

If you moved you would likely take a small fraction of your possessions. If you think your possessions are worth 100K, you will likely replace them for 25K and you should be able to that without insurance.

Insurance companies need to make money and need to keep the payout rate in the 10-35% range.

"Matt – clothing depreciates (goes out of style) in a year or two. Of your 30 casual shirts how many do you really still use. Shouldn’t most of your wardrobe go to the thrift shop anyway."

You're missing the point entirely.

First of all, men's casual shirts for the most part never go out of style. Mens' dress shirts and classic cut suits never go out of style either. Ditto for dress shoes and loafers. A good pair of loafers and wingtips, properly cared for, can last decades.

Regardless, I do have some articles of clothing that are ten years old. Some are brand new. Most are in the 2-4 year range. I'm constantly adding new items and parsing out the old.

I think you're trying to make the point that everyone buys a new wardrobe every year anyway. Perhaps some do. Most, however, don't. Oh, over the course of 5 years, perhaps, I will have nearly completely "refreshed" my wardrobe.

That said, however, if I were to lose every stitch of clothing TODAY, it would cost me nearly $30,000 that I don't have (for clothes) to replace. Immediately.

*****

"Electronics – that flat screen TV is worth a small fraction of the 5-8 K you may have paid for."

Point? My 25-inch portable that I bought back in 1995 has a NEGATIVE worth; I would have to PAY someone to take it off my hands. But I use it all the time, and if I had to replace it TOMORROW, a set with a similarly-scaled picture would cost about a thousand bucks (you need at least a 42-inch flat screen to get the same "scale" that the old 25-inch square sets gave you). That's twice what I paid for my set back in 1995.

*****

The furniture needs replacement or re-upholstering or re-finishing every so often."

Again, point?

Freshening up furniture one piece at a time is a hell of a lot cheaper than having to go out and replace ALL of it.

And don't assume that all of us buy junk. Over the course of years, I have built up a collection of well-built furniture that will last not for years but for GENERATIONS. This furniture will never need to be "replaced".

*****

If you moved you would likely take a small fraction of your possessions. If you think your possessions are worth 100K, you will likely replace them for 25K and you should be able to that without insurance."

Not if the cost of replacing your possessions greatly outweighs the cost of moving them.

And again, as I pointed out earlier, a modest wardrobe for just one professional male can easily exceed $20,000, before you've bought a single piece of silverware, dish, blender, chair, or television set.

BTW I'm hardly a shill for the insurance industry, which I consider just a notch below the pharmaceutical companies on the Evil Scale.

I'm only pointing out that your possessions -- while maybe not "worth" what you paid for them -- for the purposes of having to REPLACE them, would cost a hell of a lot more than many people realize.

NYCMatt wrote: "Point? My 25-inch portable that I bought back in 1995 has a NEGATIVE worth; I would have to PAY someone to take it off my hands. But I use it all the time, and if I had to replace it TOMORROW, a set with a similarly-scaled picture would cost about a thousand bucks (you need at least a 42-inch flat screen to get the same "scale" that the old 25-inch square sets gave you). That's twice what I paid for my set back in 1995."

What are you talking about? A 22" 720p TV that costs <$200 is capable of showing three times the pixels of an old standard definition TV, and since it's a progressive image rather than an interlaced one, it's actually updates six times the amount of information on the screen at a time.

>>Most apartment dwellers make this same mistake in thinking that they "don't have (m)any expensive things" when in fact they do

We bought most of our stuff on craigs list, furnished two houses that ways, I doubt any insurance will pay more than the Craigs list value.

Sorry, most people dont have valuable stuff.

"What are you talking about? A 22" 720p TV that costs <$200 is capable of showing three times the pixels of an old standard definition TV, and since it's a progressive image rather than an interlaced one, it's actually updates six times the amount of information on the screen at a time."

But it's not the same picture SCALE.

A 3x3 magazine picture might have more "information" than an 8x8 newspaper picture, but the scale of the newspaper picture is BIGGER.

"We bought most of our stuff on craigs list, furnished two houses that ways, I doubt any insurance will pay more than the Craigs list value. Sorry, most people dont have valuable stuff."

Either you're only 22 years old, or you're incredibly tragic.

In either case, "most" people do, in fact, have more valuable stuff than your garage sale finds.

NYC Matt wrote: "But it's not the same picture SCALE.

A 3x3 magazine picture might have more "information" than an 8x8 newspaper picture, but the scale of the newspaper picture is BIGGER."

So, what, have they suspended the laws of physics since 1995? Twenty five inches today turns out to be the exact same size as twenty five inches 15 years ago.

Maybe you're referring to the difference between 4:3 and 16:9 pictures? If so, I have three observations:

1) You should really look into this whole HDTV thing. You can now watch TV and movies that fills the whole 16:9 screen, and it's much higher quality than what you're watching now.
2) If you really love your old CRT 4:3 picture, go buy this: http://www.amazon.com/Sansui-DTV2760-27-Inch-Digital-Television/dp/B000F8Y4ZE/ref=sr_1_2?s=tv&ie=UTF8&qid=1282218363&sr=1-2. That's bigger than your 1995 TV at half the price in nominal dollars.
3) If you just want the 4:3 portion of a 16:9 TV to be the same size as your 25" TV, you can look at this handy chart: http://dharmadevil.com/widescreen/ and see that you only need a 31" 16:9 TV to do that; no one makes those, but a decent quality 32" TV can be yours for well under $400.

In other words, trying to prove that electronics are getting more expensive over time is a pretty hopeless cause.

I own multi-family investment properties, but not in New York City. Earlier this year the townhouse in Atlanta next to mine caught fire. There was no fire damage to our house but the firefighters broke through common walls, and other walls, looking for fire.

However, the smoke damage caused the real devastation. I had no idea that smoke alone could do so much harm, or how hard it is to repair. You have to rip out walls and remove smoky insulation, for example.

Fortunately, our tenant had renter's insurance. His company paid for his rent and replaced his things.

It took us 6 months of focused effort to get this smoke-damaged property livable again. This was in Atlanta, where the construction red tape is probably less than in New York City. The tenant really wanted to move back to this house, and in fact I sold it to him, which is the nice postscript :)

If you have cash in the bank to cover 6 months of rent plus replacement of pretty much everything you own, then you might want to self-insure. But renter's insurance is one of the cheapest kinds of insurance around.

Basic goods, including basic electronics, have experienced deflation. There are factors including lower demand based on higher savings add deleveraging as well as higher unemployment. On the supply side, so many efficiencies have been created in manufacturing, whether in the US or internationally through outsourcing, based on the volumes of such goods. Also, WalMart, Costco and ecommerce have forced down prices of basics so that only the most efficient sellers are in the market.

If your old TV is lost in a fire, a replacement is rather cheap.

And generally renters insurance is inexpensive in New York City where most renters are in multiple dwelling units with strong fire ratings, and proximity to fire stations. It is a bargain at a few hundred per year.

kharby2 wrote: "If you have cash in the bank to cover 6 months of rent plus replacement of pretty much everything you own, then you might want to self-insure. But renter's insurance is one of the cheapest kinds of insurance around."

Why would you need six months of rent? If your landlord can't provide a habitable dwelling, you don't have to keep paying rent.

And the reason renter's insurance is cheap is because you rarely need it, not because insurance companies have decided to make less of a profit on it. (Having said that, I agree that it's perfectly reasonable insurance to have if you don't have sufficient cash reserves to *comfortably* replace everything you'd want to after an event like this.)

For those interested, I just called Chubb for a quote and it was far more reasonable than I was expecting. For $5 million of liability coverage, $75,000 of personal goods and a $500 deductible, the quote was $550 (no automobile). My wife also has a good amount of jewelry (a $30,000 engagement ring and about $30,000 of other jewelry, watches, etc). The quote for the jewelry was an extra $1150 (also with a $500 deductible). I will probably go with Chubb - nobody else will write a $5 million liability policy. My existing Geico policy has a rider for her engagement ring but the other, smaller pieces are limited to $1000.

When you say no automobile, does that still include the non-owners liability for auto accidents that other people have implied is included with all $1M+ liability policies?

No - it does not include a non-owners liability for auto accidents. I don't rent a car that often so when I do, I purchase the insurance from the rental car company.

So did you ask specifically for that to be excluded? It sounded from the above comments like it was an "automatic" feature of the renter's liability policies. (The details in this thread are starting to confuse me.)

It actually seemed to me like the opposite - I asked about it and the agent said that was a separate policy. I didn't ask for a quote because I rent a car so rarely I doubt it would be worth it. I got a quote from another company a few years back and it was well over $100/month.

Jordyn and Downtown, yes, if you got a quote with $5M of liablity coverage from Chubb, it includes non owned auto liablity. Just because a broker has access to Chubb doesn't mean he /she knows the contract, trust me, I know the contract, I've been writing it for over 8 years. Again, for the non owned auto liability to work, you can't own or insure an auto in your personal name, and any rented or borrowed auto you have, can only be in your possesion less than 30 consecutive days. If you have a Chubb contract, you can feel comfortable declining the coverage they offer at the rental counter.

Downtown, one other thing, do you live in Manhattan, nothing seems correct with the quote above you referenced. On the super cheap with all the discounts, which probably won't apply, the renters should be a minimum of $822, the jewelry should be $1,380 and here is the tell tale, Chubb doesn't apply deductibles to jewelry. If you can bind that up as is with Chubb, please let me know, because I'll be floored.

I just assumed there was a deductible for jewelry but I looked at the quote again and there wasn't. We actually are not in Manhattan - we are now in NJ.

OK, bottom line is that renter's insurance is a really bad deal, unless you have expensive artwork or something like that in your apartment.

Even $230/year is a ripoff considering the extreme unlikeliness that anything will happen to your stuff like fire or theft if you live in a fireproof doorman building.

I have state farm and pay about $230 and yes it's very important..about 7 years ago my neighbor fell in my apartment and sued me (she was there to borrow something)...it cost me almost $10k in legal fees because I didn't have insurance..it went on for almost two years and finally she dropped the suit. If I had insurance i would have been covered..that's what my lawyer said.

Reasoning with people who think renter's insurance is a bad idea is like reasoning with a 14 year old who just got a big birthday present and wants to blow it all on candy. Yes, it is highly unlikely I will ever need it (in fact, I hope I go my whole life and never need it or (when I buy a place) homeowners insurance), but if something happens and I get sued (and let's be honest - it does happen) the insurance company pays the judgment as well as handle my defense. Although it is unlikely something will happen to my stuff, all you need to do is pick up the NYT or Daily News and look for an article about an apartment fire, busted water pipe, etc - if anybody mentioned in the article didn't have insurance, I bet they sure wish they do now. Also, renter's insurance covers things like lost luggage if the airline loses your luggage. I have two friends who were roomates and suffered a break- about 10 or 11 years back. One had renter's insurance and all of her stuff was covered; the other one had to buy everything again (laptop, some jewelry, CDs and whatever else the thief could grab and carry).

Bob-d, it's easy to spot people with no rental insurance, every night you see them on the news at 11:00, there was a fire, they are crying because they lost everything, they usually have a blanket over their shoulders that a neighbor brought them and they are off to the Red Cross Shelter with no clear direction of what will happen to theit lives next. Good luck with that.

Reasoning with people who don't understand the concept of self-insurance is like reasoning with someone who...doesn't understand the purpose of insurance.

It certainly makes sense to make sure you have a hefty liability policy--whether you need to insure the contents of you apartment or not depends on your risk tolerance and how comfortably you could replace your stuff. If you have a million dollars in the bank and $75,000 worth of stuff in your apartment, you certainly don't *need* to insure the contents of your apartment, but some people feel like the risk tradeoff (with a small chance of a large loss and a very high probability of a small gain) isn't worthwhile so they'll buy it anyway.

Telling stories of "I know someone who used their insurance and it worked!" is meaningless in this discussion. No one is disputing the insurance works when it's needed--it's just a question of who needs it. I'm sure there's a college student that can't afford to replace their iPhone if they lose one--does that mean everyone needs iPhone insurance?

"bout 7 years ago my neighbor fell in my apartment and sued me (she was there to borrow something)...it cost me almost $10k in legal fees because I didn't have insurance"

That's a good lesson not to invite neighbors into your apartment! I, personally, don't know anyone who has been sued by a house guest. It's obviously an extremely uncommon suit, otherwise the cost of rental insurance would be a lot higher.

Bob_d, since it seems to be perfectly acceptable to comment and post our thoughts on subjects we clearly have absolutely no understanding of; I thought I would give my dissertation on how to perform open heart quadruple bypass surgery in the comfort of your home for everyone on this thread.

Step 1) Collect the following items, gauze, band-aids, rubbing alcohol, needle, thread and a large bottle of Jim Beam.

Step 2) Go to your kitchen and find the largest knife you’ve got, preferably NOT a serrated knife….

Shall I continue?

"Bob_d, since it seems to be perfectly acceptable to comment and post our thoughts on subjects we clearly have absolutely no understanding of"

I understand very well the economics of insurance: insurance companies make profit, so it's a bad deal for the insuree and only worthwhile if you are risk averse.

People are rationally risk averse if the even insured against would wipe them out. So homeowners need insurance because more than their entire net worth is locked into their homes; and the mortgage lender probably requires it anyway.

For the renter, who has enough money saved up to cover the cost of the stuff in his apartment many times over, he does not need insurance on his stuff. (And if the stuff in your apartment is many times more expensive than your savings, this is a wakeup call that you are spending too much money on junk and not saving enough.)

The part about insurance against general liability is a valid point, but it's not something that most people seem to worry about that much. Also, I wouldn't want any "friends" who would sue me if they fell down in my apartment.

"and the mortgage lender probably requires it anyway." Probably, probably?????? STOP, just stop....

Step 3) Find some Windex and Paper Towel, now disinfect your kitchen table which will now be referred to heretofore as your "Operating Theatre".....

Your friends may not sue you if they get injured in your apartment but their insurance company might. For example, if my best friend comes into my apartment and gets injured he will go to the hospital and submit the claim to his insurance company. If the insurance company determines somebody else may be liable, regardless of the fact that my friend has no desire to sue me, his insurance company has that right (and likely will). Several times in the past 10 years or so I have had a completely innocent injury that apparently aroused suspicions at my health insurance provider who then sent me a questionnaire asking how it happened, where it happened and some other questions. If you have ever got one of those and wondered why - it is because your health insurance company is fishing to see if it can collect from somebody else.

Also, just because somebody has $1MM in the bank and $75,000 in belongings, doesn't mean he doesn't need renter's insurance. Maybe it is just me being risk averse, but I would rather throw a few hundred bucks down the drain every year than run the chance that one year I have to take a good portion of my savings to re-purchase everything I own. Strictly speaking, all insurance, when aggregated, is a bad deal for the purchaser (that's how insurance companies make money) but I certainly hope people would not argue against getting health insurance or automobile insurance (if you own a car). Yes, over time you will likely pay more for premiums than the benefits received but I'm sure not willing to take that gamble.

bob_d
'I understand very well the economics of insurance: insurance companies make profit, so it's a bad deal for the insuree and only worthwhile if you are risk averse.'

by that logic, you would never purchase any product/service from a for-profit company. Why pay $10 for that t-shirt from the GAP that costs them $1 to make? Or order that lo mein for $10 that costs $2 to make?

To self-insure, you need to set aside 100% of the potential loss. By buying insurance, you are massively leveraging your capital. Ditto for life insurance or disability insurance, health insurance, etc.

downtown--you summarize the argument very neatly. Yes, you are being risk adverse. That's fine. It doesn't mean that everyone else needs to be equally risk adverse, or that they are stupid for doing so. As you acknowledge, on average, you will come out ahead if you self-insure, so it's a perfectly rational course for people to take. Your statement is roughly equivalent to "I hate it when my investments lose money I keep everything in my savings account; anyone that buys stocks has the sophistication of a 14 year old."

FWIW, I'd also argue against getting collision insurance if you can afford to replace your car or even (possibly*) getting health insurance if your net worth is significantly higher than the lifetime payout offered by the insurance policy. Once again, having liability policies makes a lot of sense since your exposure to liability suits is not only nearly unbounded, but increases as your net worth grows.

* Okay, maybe not. Health care pricing is so screwed up that you'd pay way more for routine health care if you didn't have insurance, so it probably pays for itself just through the discounts that the insurance companies have negotiated.

jordyn - the problem with your comparison to the stock market is that over time the stock market always goes up (yes, it may go down for a year or two, but measured over a longer period time, it always goes up; if you know you need money for a big expense in 12 months, then yes, you should put money in a savings account). While I admit that over a long period of time, the insurance company will "win", I'm not willing to gamble that I come out ahead and I don't think it makes financial sense for anybody to do so. I'm sure virtually every credible financial planner or other financial professional would agree. The insurance company is able to aggregate millions of policies (some where they come out ahead, some where they lose millions) and make a profit - I'm not able to do that. As I said, I would rather throw away a few hundred dollars every year and know that I will never risk losing my entire net worth (or a substantial portion of it) than save that few hundred dollars every year. If others are willing to gamble their entire net worth (or a substantial portion of it) to save a few hundred dollars a year all I can say to you is good luck - I hope that works out for you.

Interesting discussion. After reading most of the posts, I’ve decided to get rental insurance as well to keep myself covered in case of any incidents or problems that may arise.

Getting the renters insurance cambridge ma is very important. Getting the insurance is very helpful, just in case for any reason you need that insurance to cover anything. This was a great read. Thank you all for sharing your posts.