The vital renters insurance policy change you’re not making

The vital renters insurance policy change you’re not making

The vital renters insurance policy change you’re not making Too many agents and brokers are unaware of a rental policy term that may end up costing both the client and themselves, says veteran New York City agent Mark Carrasquillo.

“Loss of use” coverage is a built-in coverage that reimburses a client for the cost of living elsewhere if the apartment comes uninhabitable because of a covered loss, such as fire. However, while the coverage is vital, most renters and condominium insurance policies offer limits of just 20% of contents coverage.

“That is definitely not enough coverage,” said Carrasquillo, who works as an account executive at EG Bowman. “The intention of loss of use is to make you whole. What a person should do, and how they should be advised when they purchase coverage, is to say ‘How much would it cost you to survive for 12 months somewhere else while your apartment is being fixed?’ And it’s not only rent, but day-to-day needs like toiletries.”

Unfortunately, many agents overlook this critical step—particularly with young professionals who are looking to cut costs in any way. Because agents generally accommodate these requests by lowering contents coverage, they leave clients exposed.

For most individuals, Carrasquillo recommends an adjustment of loss of use to cover 40% to 50% of contents coverage in order to get adequate policy limits.

This was a lesson he didn’t learn himself until two of his clients—who happened to be his parents—suffered fire damage in their Bronx apartment.

“They only had $12,000 of loss of use coverage, and there was no way they could find a 3-bedroom apartment for $1,000,” Carrasquillo said. “This was the Bronx where you can maybe get a one-bedroom for $900.”

Fortunately, Carrasquillo’s family pitched in to take care of his parents while their apartment was taken care of. Others, however, may not be so lucky.

Thanks to that incident, Carrasquillo and EG Bowman now make it a policy to address loss of use coverage during every referral and new client consultation period.

“From that one incident, the practice in the office changed,” he said. “You just can’t leave it at 20%.”

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  • Barbara Pinaire 3/21/2014 10:07:08 AM
    That is very good to know. The house next door to us burned last week and the renters are just going to go find another house. However, in a specific market like the writer's parents; where you want to stay in the area or building...then you definitely need to know this is covered properly. Also, the housefire next door was caused by a cigarette on the deck. Legal liability to the renter?
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  • James Sweeney 5/4/2014 6:27:04 PM
    This loss of use advice is off base. Loss of use coverage doesn't need to cover anyone "to survive for 12 months." The loss of use needs to cover temporary housing. If an apartment is uninhabitable then you have the rent money you aren't paying for your uninhabitable apartment to pay for a new apartment. It wouldn't need to be covered by loss of use. Also, an apartment truly down for 12 months would trigget a cancellation of the lease and you'd simply go rent elsewhere. One doesn't need to overpay for insurance coverage for that. An exception might be a rent controlled apartment but that was not mentioned nor is that even relevant to 99% of renters.This advice is more on point for a property owner, rather than a renter.
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  • Lori Herrington 8/4/2014 12:28:08 PM
    Have to say I am leaning towards agreement with James Sweeney. If a renter has 20,000 in contents coverage than they would have $4,000.00 loss of use. Again to state the obvious they would have this money to secure another rental or temporary housing - the amount of money they allocate for rent could be used for motels or another rental as their ability to pay for their rent wouldn't be affected by the event at the subsequent property causing them to need to use the loss of use. Am I missing something? (I do understand they would have the incidental costs involved with moving, etc. but to move 15,000 in contents.....$4,000 seems sufficient for moving, storage, deposits, etc.)
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