Working in the property placement industry for insurance companies, you learn about different policy types, additional living expenses (ALE) or loss of use (LOU), and the importance of coverage. More often than not, CRS handles homeowners additional living expenses for temporary housing. However, renters insurance is increasing in claim volume and differs from homeowners policies.
What is Renters Insurance?
Renters insurance policy provides coverage for a tenant that is renting or leasing from another party or entity. Since the tenant does not own the building, a policy that covers their own personal belongings and certain liability exposures is necessary. Renters’ insurance does provide loss of use coverage, but it is limited. Additional coverage may be added, if the insurance carrier offers. The amount for contents, liability, and additional living coverage will always be different based upon individual needs and can usually only cover one person.
Temporary Housing for Renters
When a renters insurance claim is made, the policyholder, depending on the policy, has a choice: go back to their property (based on the lease, current landlord, and extent of damage), or find a new property.
If the policyholder chooses to go back to the original property, their adjuster will pay anything over the policyholders usual rent. However, the temporary housing must be comparable to the damaged property. The policyholder is still responsible for paying their monthly rental amount to the current landlord, insurance company, or temporary housing company. For example, if a policyholder is normally paying $1,100 per month and the hotel or new rental is $1,500 per month, the policy holder is still responsible to pay $1,100 and the insurance company will pay the remainder $400 until repairs are completed or depending on how long or amount the policy allows. If other amenities are needed for the temporary stay (i.e. rental furniture, utilities, etc.), they will also be covered by the insurance company. Always review your policy to make sure what is covered and understand what the amount or time limit is. If there are roommates, they have to have their own policy to be covered for any additional living expenses.
When a tenant decides to relocate from their property permanently because of a total loss or their lease is about to expire, they are still covered for temporary housing based on additional living expenses in the policy. However, they are not required to pay their monthly responsibility because their rent will go towards the new property. The amount or time that a policyholder has until a new property is located is based upon the individuals’ policy. So, the adjuster can only provide a hotel or other accommodations for a limited time, making it crucial for the policyholder to locate their new property. CRS provides services to policyholders that are looking to relocate permanently to help find a property as quickly as possible based on the policyholders needs. However, CRS is typically not authorized to provide rental furniture and other amenities.
Each policy is unique and is based upon individual needs and expenses. Always review your policy to make sure you understand exactly what is covered in case of a disaster. Always ask your insurance agent questions regarding your policy and make sure to keep your contents and coverage up-to-date.
Sources:
http://www.insweb.com/renters-insurance/FAQ.html
http://www.esurance.com/insurance/renters/coverage
https://www.geico.com/information/publications/newsletter/2009/importance-of-renters-insurance/
https://www.statefarm.com/insurance/home-and-property/renters/coverage-options
