An Expat Guide to Renters’ Insurance in New Jersey

MOVING TO NEW JERSEY: Why Expats need Renters’ Insurance in New Jersey

If you are an expat renting in New Jersey for the first time ever, or perhaps in a long time, you may not realize that renters’ insurance is a really good idea. For a relatively low cost, you can gain a high level of protection for all your personal goods. More than that, you will get some coverage in case an injury happens to a visitor or service-provider while in your home.

While this topic is not exactly riveting stuff to read about, the costs involved with not having insurance can be truly super-scary. Let me warn you up front – this is a very, long blog post, as I have tried to cover everything important on renters’ insurance. If you think you can handle this then read on, to discover how to avoid a possible nightmare.

Personal Liability if Someone gets Hurt

Take the example where you are renting a place in New Jersey and your dog decides to bite a guest or the postman. Depending on the bite severity, you could be up for a lot of money. When our dog bit my neighbour’s little girl, it didn’t break the skin, so she and I were both very lucky (plus the neighbours happen to be very nice forgiving people). I think by far we were the luckiest in this case. Not long after this, a friend told us how his dog bit the postman and then he was sued for $25K.

 

My eyes started to water when he told me this, but guess what? It can be a lot worse. When there are more complications to the bite and perhaps cosmetic surgery is needed, the medical bills can be much higher, even up to or over $100k. That’s a princely sum, which many of us would not have readily available if required.

Dog bites are one of the most common causes behind liability claims in the US, contributing up to one-third of all claims (2015). However, these are not the only way people can get hurt at your home. People can trip over your floor mat or your garden hose, or burn themselves doing something in your kitchen. Perhaps you didn’t get time to clean the ice off your front pavement before someone slips over there during winter. If children come over for a playdate and something happens during that time where they get hurt, then of course, you are going to be expected to pay for any damages.

Getting insurance for personal liability in the USA should be a no-brainer. It is something to plan for, when you live in a very litigious society, where medical care can be horrendous financially, and suing people is second nature.

What if Your Personal Property is Destroyed or Stolen?

Even if you don’t have a dog, there is always the chance of fire or theft. Fire alone, is a very common issue amongst households in the US, with nearly 1 in 4 suffering from some sort of fire. Even if it is your neighbour’s home that is burnt, your property can be irretrievably damaged by the smoke and ash from the fire, and water from the fire department’s hoses.

Perhaps some people assume the landlord’s insurance will take care of replacing their goods. Unfortunately, this is not the case. Property replacement will be your own responsibility and it is likely going to be another hefty bill that most people cannot afford to cover. Imagine if you had to dig up $20,000 or $30,000 or more, all of a sudden to replace all your stuff? That is why insurance is needed.

The great thing about renters’ insurance is that is costs relatively little versus other types of insurance – usually around $200 or less per year. The average New Jersey renter’s insurance is $166 annually which is approximately $14 per month (Value Penguin, 2019).

Renters’ Insurance is Mandatory with Many Landlords

A while back, one of my blog readers commented that renters’ insurance was not required by landlords. I guess that reply would have been based on their own experience. Given that many young people do not take out renters’ insurance in the US (Nationwide Research: Policy Genius 2019), of course there must be situations where it is avoidable because it is optional.

Let me be clear – renters’ insurance is not compulsory by law in New Jersey. That said, it is a basic requirement in most rental buildings run by property management teams who include it in their own standard leases. It is also included in any rental agreements using the New Jersey Association of Realtors standard residential lease. This is the format which most NJ realtors use. The standard wording used in this lease  is shown below – Item 20: requiring the Tenant to obtain insurance, that the Landlord can request to sight.

But even if it is not compulsory, why on earth would you risk everything mentioned above when a basic policy can be purchased for a fairly low outlay?

What does Renters Insurance entail?

Renters’ insurance contains four key elements:

• Property protection
• Temporary Living expenses for Loss of Use
• Personal liability coverage
• Medical bills

 

Property Protection

This is coverage of your personal belongings in case they are damaged, destroyed or stolen. It includes things such as crockery, linen, furniture, appliances, electronics, computers, equipment, clothing and jewellery. Some policies may cover theft of belongings from your car, although not the car itself – that is what auto insurance is for. Sometimes a policy may also cover a third-party person’s belongings if you have borrowed it and it is in your home.

Replacement of your goods will be provided for what is termed a ‘covered’ loss. As you might expect, not all events are covered, such as flooding or tidal surge. However, the sudden flow of water from a washing machine malfunction is usually covered. Flooding insurance can be covered under the government’s own program called National Flood Insurance Program (Look up at www.floodsmart.gov). Otherwise you would need to get specific flood coverage as an addon insurance.

A standard renters’ insurance policy may possibly cover around $5,000-10,000 of personal goods which is not very high, but this coverage amount can be increased. Coverage increases will of course increase the policy cost. Be aware that it is usually more expensive to increase coverage of personal goods than for liability.

See further below (Table 1) for a list of covered and not covered losses in New Jersey.

Temporary Living Expenses

Covers living expenses that are incurred while you are forced to live temporarily outside your rental home, due to circumstances created under a ‘covered’ loss e.g. where a fire makes your home uninhabitable. This includes things like hotel accommodation, food and other essential costs.

Personal Liability

As explained above, this is to cover you for legal defence in specific lawsuits brought against you, for personal injury or property damage. It also helps cover you in case you are found legally responsible in these circumstances.

A standard policy may include coverage of $100,000 of personal liability. This coverage can normally be increased for a relatively small extra cost.

Medical Expenses

Pays for medical expenses of your guests and visitors that are hurt while on your property e.g. a dog bite or injuries as above.

Covered and Not Covered Losses in New Jersey

Covered situations are typically called ‘perils’ in insurance speak. It is quite important to understand what is covered in New Jersey renters’ insurance policies. Below is a summary of what is and what isn’t, from NJ Government summary (2019).

Table 1

Covered Loss	Uncovered Loss
Fire and lightning	Flooding and tidal surge
Sudden and accidental damage by smoke	Earthquakes including earth movement
Explosion	Mudslides, rockslides and sinkholes
Theft	Pests e.g. insects, bedbugs, termites, rats, mice, birds
Vandalism and malicious mischief	Freezing pipes – unless building was heated
Aircraft and vehicles	Uninhabited premises for certain time
Windstorm and hail*	Wear and tear, rotting, maintenance, pollution
Sudden and accidental water damage	Mould – unless due to a covered loss
Weight of ice, snow and sleet	Water damage from continuous seepage
Riot or civil commotion	Intentional acts by tenant; war and terrorism

*Some policies may include an optional wind and/or hail deductible; and an optional or mandatory hurricane deductible.

 

Things to Be Aware of with Renters’ Insurance

Replacement Cost versus Actual Cost Value (ACV)

An important choice to be made when taking out renters’ insurance is what costing approach to use. The choice is between coverage based on what your personal goods would be valued as if replaced from brand new (called replacement value); or if to get the actual value of them as they are currently, with age and depreciation considered (Actual Cost Value).

Replacement of goods at new cost is likely going to be more expensive for most people versus actual value, so the premium is going to be higher usually. However, replacement with new goods is often more realistic.

Insurance Policy Deductible

All insurance policies will have some sort of deductible. This means the sum of money you will pay first before the insurance compensation payment is made. Normally, a renters’ insurance deductible might be $500-$1000. A smaller deductible means a larger premium (higher rates) usually, while a larger deductible payment can mean a lower premium (lower rates). You can decide what sort of deductible amount makes the most economic sense for you.

Banned Dog Breeds for Insurance Coverage

Some insurance carriers have a list of banned breeds that are excluded from insurance coverage for medical bills and liability for injury or harm caused. These can include medium-large dogs or aggressive breeds. Examples of such breeds may include Rottweilers, German Shepherds, Doberman Pinschers, American Bulldogs, Pit Bulls, Staffordshire Terriers and Mastiffs. These vary by state and insurance provider, so this should be understood before taking out any policies.

Policy Limits on Expensive Items

Some items such as jewellery can have limits set on how much you can claim back for these specifically, as part of an overall policy. For valuable items, you probably should consider specific add-on insurance, or a rider for your policy. These will increase your premium but your belongings will be better insured, so you can claim enough back to replace them fully should they be stolen.

What to Do to Take Out Insurance?

To take out renters’ insurance there are just a few things you need to do. 

• Make an inventory list of all your belongings that you want to cover under the policy. It is important to also cost everything, so you know what coverage amount to get. The average renter can own around $20,000 of belongings so don’t cut corners on this exercise.

You can use insurance company apps to help you with this task. Insurance carriers that provide apps or calculators currently include Allstate, Country-Wide Insurance, Liberty Mutual, State Farm and others. Alternatively, there are third-party apps such as Sortly and Encircle (iOS only) that can help you keep count of what you have at home.

A useful article about making a home inventory can be found online at : https://www.policygenius.com/renters-insurance/how-to-create-a-renters-insurance-home-inventory/

• Remember to be clear about choosing either replacement or ACV costing approach in your policy. Understand what that means financially.

 

• Shop around for the best deal. Several large companies as well as many smaller players offer renters’ insurance.

 

• See if the insurance can be bundled with other insurance for a discount, if using your existing insurance carrier for auto or home insurance.

 

• Check their list of ‘covered’ losses to see if there are any notable exclusions

 

• If you have a dog, check to see if your dog’s breed would exclude you from liability and medical expense coverage.

 

• Check if you need any extra coverage on jewellery, equipment etc., not fully covered by the policy you are planning to take out.

 

• Use an online insurance calculator, to assess what savings to your insurance premium that different sized deductible amounts can deliver.

Summary

Now that you know the risk of not having renter’s insurance, there should be no excuses for not having a policy in-hand after moving into your rental home in New Jersey. For further information you can read the NJ Government’s booklet of information on renters’ insurance at:

https://www.state.nj.us/dobi/division_consumers/insurance/renters.pdf.

The US Insurance Information Institute also has a guide to be found at: https://www.iii.org/article/your-renters-insurance-guide

Important Note: This is general information only, and not intended to guide any individuals to purchasing particular products. While we try to ensure all information is up-to-date, we cannot guarantee that this is still the case once published. We highly recommend that individuals confer with an insurance specialist or to thoroughly review policy contents before purchasing.