Should I Buy My Renter’s Insurance Online?
The insurance market continues to change each and every day, but the pace of automation has lagged other industries. Over the past few years more headway has been made to allow shoppers to purchase their insurance directly through companies’ online portals. These websites might be for a single insurance company or an insurance aggregator’s site that takes your data, receives quotes from several sources and then provides you with the lowest price or most appropriate quote.
I searched Google for "renters insurance quote” and it came back with 6,570,000 hits. Yikes! How will you choose which site or which company to use? How many quotes should you get? How long will this “simple” quoting will take?
Some of the sites I visited required almost no information about me. Just enter a zip code, select from several coverage choices and click to continue the buying process (which required providing all of my personal information and paying for the policy). Several of the sites I reviewed required more personal information during the initial quote, which led me to believe that there was more underwriting and that the quote would be personalized. All in all, these sites are extremely simple.
Since it seems so easy, is it OK to buy renters insurance online? Let’s test your insurance knowledge before I answer that.
When I need a package of 40-watt light bulbs I can go online, compare prices, order and have the package delivered for free in two days. I may want to verify that the online merchant is safe to do business with and perhaps read a review on the brand of light bulb that I select, but that’s about it. However, renter’s insurance selection is significantly more complex than light bulb selection. Here are 8 questions you should answer before you click “Buy.”
- How reputable is this insurance company?
At the end of the day you need to know the insurance company you choose is financially strong and will quickly and fairly settle your claim. Individual states’ Departments of Insurance are often the best place to start your research. The National Association of Insurance Commissioners, NAIC, also maintains a simple search site for insurance company financial data and complaint information (https://eapps.naic.org/cis/stateReportCriteria.do).
- What coverage can I get?
A typical renter’s policy covers your personal belongings (contents) and provides liability protection and additional living expense (ALE). But you may need additional coverage.
- What perils are covered?
Renter’s insurance for your contents can be comprehensive or named perils (e.g. fire; theft). All policies contain lists of specific losses and items that are not covered (exclusions) or which have limitations on the amount the insurer will pay (e.g. limiting theft of jewelry to $500). I would certainly not purchase any policy until I understood what was and was not covered.
Perils not covered in any renter’s policy include Earthquake and Flood. If you live near the coast, Hurricane coverage may also be limited.
- Who will this policy protect?
A standard ISO renter’s policy covers you, your spouse, your relatives living with you, your son or daughter away at school and anyone in the household who is under age 21 and in your care. Unless you are able to find and read the online insurance policy, you probably can’t answer this question.
- What type of insurance claim settlement is provided for my contents?
Contents can be covered using actual cash value settlement (ACV) or using a replacement cost basis (RCC).
ACV is often defined as the cost to pay for replacement of the damaged property with the cost of a new item, less allowance for physical deterioration and depreciation. For example, a five-year-old chair may have used 50% or more of its appreciable value.
RCC is typically replacement of the damaged item with a brand new item, without any adjustment for depreciation. Some companies, however, limit your recovery to some percentage of ACV.
- How much coverage can I buy and how much coverage do I need?
You may know the answers to this question. If so, great; but if you don’t you may struggle trying to find much help online. You will be required to select the amount of contents, liability and medical coverage provided by the policy. You’ll also have to select the policy deductible.
To determine the value of your contents, I suggest you complete a home inventory. The Insurance Information Institute maintains a terrific website just for this purpose (https://www.knowyourstuff.org/iii/login.html).
To determine how much liability insurance to purchase you must first understand your financial situation and estimate your exposure to liability loss and lawsuits. As a renter, if your negligence causes a fire in your apartment, and the whole building is destroyed, a liability limit of $25,000 or $50,000 will leave you woefully short.
- Where is coverage provided?
A typical renter’s policy covers your personal belongings anywhere in the world. Some low-cost policies may limit where your coverage applies.
- Do I qualify for any discounts?
Many companies offer discounts for packaging your auto insurance with your renters insurance as well as other discounts including those for security systems, for being over age 55, for having good credit, etc. These may not be offered when purchasing directly on some online renter’s insurance portals.
Knowledge is key to any insurance decision and purchase. If you cannot answer these questions, what should you do? I recommend getting several online renter’s quotes. That will give you an idea of limits and prices being offered. Next, I would call a licensed insurance agent (independent agent or company-direct) and ask them to quote my renter’s coverage. That agent will be able to answer the questions above and will provide you with professional information, options and advice.
If you decide to buy online, I strongly recommend that you obtain a copy of the actual insurance policy and read it immediately – before you have a loss and find out it is not covered.
Back to the question, “Should I buy my renter’s insurance online?” The answer is, “It depends.”
Jonathan Farris is a retired insurance executive and president of InsuranceRescue Services, LLC, a property & casualty insurance consulting firm based in Madison, Wisconsin. Mr. Farris can be reached at firstname.lastname@example.org.