Comprehensive Guide to Tenant Insurance

Posted on: Oct 6, 2023 | 3 mins | Written by: HDFC ERGO Team

Comprehensive Guide to Tenant Insurance

For some, renting a home often feels like a stepping stone towards owning our dream house someday. It's a temporary arrangement for others as the future holds certainty about where they want to settle. But irrespective of the reasons, one thing is common — unfortunate events such as fires or thefts can turn our plans upside down. The assumption that a landlord's home insurance policy covers tenants is a common misconception that needs debunking. The truth is your personal belongings, from costly furniture to essential appliances, remain unprotected without your coverage. And as if that weren't enough, you could find yourself liable for accidental damage to other's property, leaving you financially vulnerable. Fortunately, there's a straightforward solution to these worries: tenant insurance or home insurance for tenants.

Understanding Tenant Insurance

Tenant insurance, also known as renters' insurance, is a policy that provides financial protection to the tenant's personal belongings against unforeseen incidents such as fire, theft, and natural or man-made disasters. A home insurance policy typically protects the structure and contents of the house if there's any damage or loss due to natural or man-made calamities, fire, theft, etc. However, if the homeowner gives his/her house on rent and something happens to the property damaging the tenant's personal belongings, the policy will not cover the loss. The house owner is also not responsible for it. So, as a tenant, you have to opt for separate tenant insurance that will protect your belongings or liability. The policy will also reimburse you for any additional expenses if you have to temporarily relocate from your house because of any damage that is covered in the policy. The premium of tenant insurance is reasonable as compared to that of homeowners insurance.

What Does Tenant Insurance Cover?

• Natural and man-made hazards:

Secures your house against natural calamities like floods, earthquakes, cyclones and man-made hazards like riots, strikes, terrorism, and malicious acts.

• Fire:

A fire can raze your house to the ground, but insurance will cover the loss incurred if you have insured it.

• Theft:

Tenant insurance will cover the cost of your valuables if they got stolen while you were away.

• Electrical breakdown:

Any breakdown of electrical appliances will not only disrupt your daily life but is an unexpected and additional expense. If you have tenant insurance, the cost of repairing the appliances will be covered.

• Alternate accommodation:

If the house gets severely damaged in a flood or cyclone and becomes unfit for living, the insurer will pay for your alternative temporary accommodation till the house gets repaired. It will also take care of your shifting expenses, emergency purchases, etc.

• Accidental damages:

Insurance covers accidental damage to fixtures and sanitary fittings of your house.

Exclusions and Limitations

• Wear and tear:

If you take up any renovation or maintenance work due to natural wear and tear of the property, the expenses are not covered.

• War:

Any damage to the house due to war or acts of war is excluded.

• Old possessions:

We get emotionally attached to old items that may have been passed down from generations but remember, any items that are more than 10 years old will not be covered.

• Collectable items:

Do you have a hobby of collecting stamps, coins, paintings, etc? Keep them safe because any damage to these precious collectables is excluded from coverage.

• Wilful damage:

Your insurer is not responsible for any wilful damage to the content of the house.

• Consequential loss:

Any loss to your possessions which is not directly the consequence of any of the inclusions is not covered.

• Cost of land:

Tenant insurance does not cover the cost of land; it is only for the contents of the house.

• Third-party construction loss:

If the property gets damaged due to third-party construction, your insurer will not provide coverage.

• Under-construction cover:

Insurance is for your home, not any under-construction property.

Factors Affecting Premiums

There are various factors which affect the premium of home insurance for tenants , and some of them are —

• Coverage:

The cost of insurance depends on how much coverage you need. The higher the coverage, the higher will be the premium. So, when you are choosing the coverage amount, make a list of the belongings and insure only those which will be expensive to replace when damaged. For expensive and valuable items like jewellery and portable equipment, you have to opt for add-ons by paying an extra premium, as they are not covered in the standard renters' insurance policy.

• Location:

If you reside in a calamity-prone area or in a neighbourhood where crime rates are high, the insurer will charge a high premium because the likelihood of filing claims is more.

• Deductible:

A deductible is the amount you have to pay before the insurance coverage kicks in. If you opt for a high deductible amount, the premium will be low but make sure you can afford the deductible when there's a claim.

• Age of the building:

New buildings or those with updated and safety devices will cost less than old buildings.

• Discounts:

Most insurance companies offer discounts if you install safety and security devices, such as fire and smoke alarms, automatic sprinklers, burglar alarms, fire extinguishers, etc. This will reduce your premium.

• Add-on covers:

The basic tenant insurance will not cover valuables like jewellery, portable electronic equipment like laptops, cameras, or even your collectables. If you wish to protect them, you must opt for add-on covers by paying an additional premium.

Tips for Choosing a Tenant Insurance Policy

Choosing the right tenant insurance policy is important to get adequate protection, and here are some tips —

• Choose the right sum insured:

Before you choose the sum insured or coverage amount, make a list of your possessions, their cost when you bought the items, their worth now, etc. This will give you a fair idea of how much coverage you need. The policy should also include liability coverage, which will protect you if a guest gets injured while they are in your house.

• Know the exclusions:

Don't just check the list of inclusions; you must also be aware of what all are excluded. This will help you buy the right plan based on your specific needs and also avoid unpleasant surprises while filing claims.

• Bundle the renters' insurance policy:

Bundling your tenant insurance with other insurance policies like motor or health insurance can get you good discounts, thus, saving on the premium amount.

• Opt for a high deductible:

A policy with a high deductible will have a low premium. This will help you save on premiums, but you must be financially capable of paying the high amount upfront while filing a claim.

• Brand reputation of the company:

Look for an insurer with a good reputation in the industry, check the claim settlement process, claim settlement ratio, customer service, customer ratings, etc., before you buy the policy.

Frequently Asked Questions (FAQs)

1. I am a tenant. Will my landlord's insurance cover my house too?

The landlord's home insurance or homeowner's policy will cover the structure and contents of the house if there is no tenant. Since the house is rented out to you, the homeowner's insurance will not cover your belongings if they get damaged in a fire or natural disaster. Your landlord is also not responsible for the loss incurred. So, you should buy tenant insurance that will protect you against any adversities.

2. Does tenant insurance cover alternative accommodation if I have to shift temporarily?

Yes, if the house becomes unfit for living due to any covered peril, you can shift to an alternative accommodation for a temporary period, and insurance will take care of the expenses.

3. Will insurance cover all my items if damaged in a fire?

Insurance will cover only those items listed in the policy inclusions. For example, valuables like jewellery will not be covered in the standard tenant insurance; you have to buy an add-on cover for that. Similarly, items that are more than 10 years old are not covered.

Conclusion

When we rent a house, we don't pay any attention to insurance, assuming the homeowner's insurance will protect our belongings too. But the fact is, it will not cover any of the tenant's possessions. So, to stay financially protected against any damage to your possessions, it's advisable to buy tenant insurance or home content insurance .

Disclaimer: The above information is for illustrative purposes only. For more details, please refer to the policy wordings and prospectus before concluding the sales.

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