Renters Insurance

Renters Insurance Endorsements And Floaters

Renters Insurance Endorsements And Floaters

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Like homeowners insurance, most renters insurance policies have exclusions that limit what's covered. But by adding endorsements and footers, tenants can make sure their renters insurance offers adequate coverage. Here's what renters should understand about policy limits, endorsements and floaters when shopping for a policy.

Endorsement vs. scheduled floater

What is an endorsement? Endorsements (also called riders or options) allow a policyholder to raise the claim limit on a specific category, such as jewelry or sporting equipment. It is effectively purchasing additional coverage for personal property that the insurance company views as unusually valuable. Endorsements or riders are generally cheaper than scheduled floaters because they typically only increase the limit of one category.

What is a scheduled floater? A scheduled item, sometimes called a "floater" policy, extends coverage for a specific item or collection instead of an entire category. If the value on one of your belongings exceeds its category limit, then it's a good candidate for scheduling. Floaters also tend to provide more comprehensive coverage and can cover claims such as an accidental loss, which a standard renters insurance policy would not cover.

For example, let's say a renter owns two rings — each valued at $2,000 — and both need to be insured. Most renters insurance policies set an overall claim limit for jewelry and furs of $2,500, which isn't enough to cover both rings in this scenario. An endorsement could increase the claim limit of the jewelry category so both rings are covered.

But if one ring is much more expensive, the policyholder may need to take out a schedule for the ring's full value.

Types of endorsements and scheduled floater policies

Insurance companies typically offer a set of basic riders — and in most cases, single items within any of the categories can be scheduled and covered with a floater policy.

Sewer and drain backup: A backed-up sewer or drain can cause significant damage to a home and personal property. Your landlord might purchase a sump pump to prevent overflow, but if you don't tend to the system, you could be responsible for any damage it causes to the property. Renters are also responsible for their own personal property, which could be damaged in a water backup.

Even the top insurance companies frequently exclude this coverage from renters and homeowners insurance policies. It's also not covered by flood insurance, so adding an endorsement is a good way to protect personal property near the pump.

Adding the sewer and drain endorsement usually only costs about $40 to $50 per year. But if there is a sump pump in a building with multiple units, the landlord or superintendent should be responsible for it, and tenants would have no need for this endorsement.

Jewelry, furs and similar valuables: Since jewelry, furs, watches and other high-value items can be easily stolen or lost to a covered peril, most policies have an overall claim limit between $1,000 and $2,000. Considering jewelry in particular, a $2,000 limit is not very high. If the total value of your items in this category exceed your overall limit, then you should purchase an endorsement. Remember that policies have per-item limits as well, so if one of your items exceeds the overall claim limit, you should schedule it with a floater policy.

Electronic equipment: Televisions, stereo systems and video game consoles are all examples of property that fall under this category. The claim limit for electronic equipment is not always a set dollar amount. Instead, the limit might be a percentage of the policy's total personal property coverage. Policies usually cover up to 10% of the total personal property limit.

For example, say a renters insurance policy covers up to $30,000 of personal property. Assuming claims for electronic equipment have a limit of 10% of that coverage, payouts would be capped at $3,000. The value of a typical television set, laptop computer and sound system could easily exceed that amount, so renters should consider expanding this category's limit.

Sports equipment and musical instruments: Sports equipment and musical instruments have per-item and overall claim limits, typically ranging from $500 to $2,000. Renters should consider whether any of their belongings fall into this category. A bucket of baseballs or a harmonica probably aren't worth paying the deductible, but one set of golf clubs or a piano could easily be valued well beyond the standard limit of a policy.

Collections: This category typically includes memorabilia, such as baseball cards, comic books and album covers. Policyholders must have their collection valued by an appraiser for the stated value to be covered. The limit should cover the total value of everything within the category, as a fire or other peril would likely affect the entire collection.

Earthquakes: A basic renters insurance policy doesn't protect personal property damaged by an earthquake, but a policyholder can add an earthquake endorsement. This endorsement will not cover sinkholes or any damage to land, including large cracks or holes that appear on your property. If your renters insurance company doesn't offer an earthquake endorsement, you may purchase a separate earthquake insurance policy from a different company.

Sinkholes: This endorsement covers direct physical loss or damage to insured property caused by "sudden settlement" or a sinkhole. Renters and homeowners insurance policies sometimes cover "catastrophic ground cover collapse," but the event might have to meet a stringent list of criteria to qualify for coverage.

A sinkhole endorsement effectively covers sinkholes that don't meet all criteria for homeowners policies and the exclusion in earthquake insurance. Sinkholes are rare, but some states, such as Florida, are more susceptible to them than others. Anyone who lives in an area with a history of sinkholes should consider purchasing this endorsement.

If your insurance company doesn't offer a sinkhole endorsement, you may purchase a stand-alone sinkhole insurance policy.

Identity theft: This type of coverage protects you against crimes related to identity theft. Some renters insurance policies include some coverage for identity theft, but an endorsement can increase the limit. These types of policies are growing in popularity as the number of identity theft crimes increases. Javelin Strategy & Research found that more than 14.4 million adults in the U.S. had been victims of some form of identity theft in 2018, and new-account fraud resulted in $3.4 billion in aggregate losses.

Let's say an identity thief makes dozens of fraudulent purchases with your credit card. The credit card company should expunge the fraudulent charges without any expense to you. However, if you need to defend any lawsuit brought against you by merchants, financial institutions or collections agencies, this endorsement would reimburse you for that cost.

Assisted living care coverage: This is a special endorsement offered by few insurance companies because of its infrequency of use. For that reason, it is not coverage most people need. It covers the expenses of an assisted living facility for a relative of the insured by blood, marriage or adoption that is not a member of their household. It also provides expense coverage for the relative up to certain limits for things including hearing aids, eyeglasses, contact lenses, false teeth or dentures, a medical-alert device, walking aids and wheelchairs while they are staying at the facility. It does not cover hospice care.

Boats and other watercraft: Boats and other watercraft are not usually protected once they are on the water or if they are not on the premise of the policyholder's residence. Watercraft is also sometimes excluded from renters policies, which is why this endorsement exists. It provides liability and medical payments coverage for motor watercraft with more than 25 total horsepower and longer than 26 feet in length (including sailing vessels).

Refrigerated property coverage: This coverage protects the contents of freezers and refrigerators in the event electrical service to a device is interrupted. Interruptions caused by damage to the power transmitter (on or off premises) or mechanical failure are covered. The endorsement usually has a low limit and a deductible. Unless you're someone who has an atypical number of things stored in freezers or refrigerators, you generally don't need this coverage.

Riders that don't apply to renters

Some endorsements cover a category within an insurance policy that doesn't apply to a renter. We've listed some of those and explained why below.

Inflation guard endorsement: This type of endorsement automatically periodically increases the coverage limit on a home to account for inflation. Since renters don't own the dwelling they occupy, they have no need for this endorsement. However, a property owner might want to consider it. In fact, some insurers include this feature in their homeowners insurance policies from the start.

Yard and garden: This endorsement increases the claim limit for landscaping and tools that many renters don't have. Unless you have a garden or you're responsible for the home's lawn maintenance, you likely won't need this type of coverage.

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