New Grad: Am I Living Beyond My Means?

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DoingHomework
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Re: New Grad: Am I Living Beyond My Means?

Postby DoingHomework » Tue Oct 16, 2012 11:11 am

Bichon Frise wrote:Just b/c something is "cheap", doesn't mean you should buy it. I've never signed a lease stipulating renter's insurance. It is only for the contents, so I have no idea why an owner would want you to have it.

You can breach a contract anytime you wish, and yes you can be sued. But, that doesn't mean you will. Please tell me the damages an owner would have b/c their tenant does not carry renter's insurance?

Perhaps there is a good reason, like their brother in law sells it. But since renter's insurance is good for the tenants' contents only, I'm having a hard time coming up with a reason.


I also wondered about that comment...about a lease requiring renter's insurance. I'm not sure I even understand how that would be legal. A landlord can put whatever they want in a lease but that does not make it legal or enforceable. But even if it is legal and enforceable, they would have to sue you and show actual damages. Unless they demanded to be listed as a "named insured," they would not have a way to even have damages because they would never be entitled to any coverage even if something happened.

Renter's insurance covers damage to the renter's property only so it is hard to see how the landlord has anything to gain or any standing to require it. I guess some landlords would want a renter to have it so that if something happens they don't come after the landlord. But that is probably just ignorance because if the landlord is at fault, they are at fault. The insurance company will just come after them with bigger guns.

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Re: New Grad: Am I Living Beyond My Means?

Postby jac » Tue Oct 16, 2012 11:13 am

Yes but...that should have been covered by your landlord! The owner is responsible for mechanical failures and any consequent damage. It's great that your renter's insurance paid you but I strongly suspect they are going after your landlord's insurance behind the scenes.


In Washington state, that's essentially not true: Landlords cannot be held liable for property damage resulting from a repair problem unless they knew or should have known about the problem. http://www.tenantsunion.org/rights/faq/repairs/#i-cant-live-in-my-unit-because-a-pipe-burst-causing-a-flood.-is-my-landlord

So in theory, yes, perhaps my insurance is following up on the failure and investigating whether the landlord 'should have known' it was going to occur, but I certainly wouldn't be capable of doing that myself. I could have asked the landlord to cover my hotel cost, true, but the only way of forcing them to do so would be small claims court.

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Re: New Grad: Am I Living Beyond My Means?

Postby LeRainDrop » Tue Oct 16, 2012 11:16 am

Although primarily for contents, renter's insurance also provides liability coverage for injuries and other damages visitors sustain while on the property, as well as damage the renter inadvertently causes to the building. The liability aspect is important to the landlord because a litigious, injured visitor may go after the landlord in addition to the renter. Also, if the renter has insurance and suffers losses, then he is probably more likely to simply file his insurance claim rather than (wrongly) sue the landlord. And, yes, the landlord requiring the renter to maintain renter's insurance is entirely legal and a common practice in the US.

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Re: New Grad: Am I Living Beyond My Means?

Postby DoingHomework » Tue Oct 16, 2012 11:40 am

LeRainDrop wrote:Although primarily for contents, renter's insurance also provides liability coverage for injuries and other damages visitors sustain while on the property, as well as damage the renter inadvertently causes to the building. The liability aspect is important to the landlord because a litigious, injured visitor may go after the landlord in addition to the renter. Also, if the renter has insurance and suffers losses, then he is probably more likely to simply file his insurance claim rather than (wrongly) sue the landlord.


That is all true. But you must understand that liability is either present or not and has nothing to do with whether you have insurance.

Let's say that you are a renter and you leave a hose across your walk. Someone trips over it and is injured. You and the landlord may both be liable - you for your action and the landlord because it occurred on their property. The injured person would always sue both of you and if he won he would recover based on the proportionate liability of both you and the landlord. Whether you are insured is not relevant until it comes time to pay up.

Long ago when I rented we were broken into. We had renter's insurance and we filed a claim. Our insurance company paid us immediately. But, then they went after the landlord for the full damages PLUS administrative fees and other costs. Since the burglars broke in by breaking the door lock and the landlord is required to provide secure locks, they were determined to be liable. Clearly it could be different in other states but it seems bizarre to me that a landlord would want to require insurance. If we had not had renters insurance we would not have filed a claim and the landlord would not have paid out anything. By requiring insurance a landlord is essentially inviting the aggressive action of the renter's insurance company against them when something happens.

And, the fact that the coverage might extend to damages caused by the renter would also scare the crap out of me as a landlord. It would put me in the position of dealing with an insurance company bureaucracy rather than just dealing directly with a tenant over damages.

On the other hand, I happen to rent a place out now. I carry insurance for my liability and it is dirt cheap, less than half of what that quote for renter's insurance is.

I do think renter's insurance is a good idea if you have valuables to insure or if you have a high enough net worth to be concerned with personal liability. But as a landlord it does not seem like I have any interest in whether or not tenants cover themselves. If anything I think I would prefer that they NOT have renter's insurance.

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Re: New Grad: Am I Living Beyond My Means?

Postby LeRainDrop » Tue Oct 16, 2012 11:57 am

DoingHomework, your assessment about proportionate liability varies depending on the state -- many states would only hold one or the other liable. And trust me, I totally understand that liability is independent of whether insurance coverage is in place. The point is that coverages tend to encourage different behaviors. Also, the landlord should not be mired in the carrier-carrier issues, but instead that is for the carriers to hammer out. Btw, as landlord, if your renter claims against your insurance, watch your premium go up! Landlords should want to avoid getting sued, whether suit is actually warranted or not. (That is also similar to why product manufacturers have ridiculous-sounding warning labels on some things -- because they got burned once and want to avoid getting sued (and having to settle) ridiculous claims by consumers.)

Anyhow, it seems that at least we agree that from a renter's perspective, having renter's insurance gives piece of mind for relatively little cost. So, to bring it back to the OP, whether or not her lease actually requires the coverage or not, she is smart to have included it in her budget. Cheers! And again, many thanks for your insights on my brother's loan question :-)

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Re: New Grad: Am I Living Beyond My Means?

Postby StarryC » Tue Oct 16, 2012 1:29 pm

To answer your question, I don't think you are living beyond your means. I can tell because you are intending to spend less than you earn. Lots of people might encourage you to stay with your parents until eternity to save more money. You are a grown up. Let them save for retirement while you take care of yourself and enjoy being an adult!

$35 for renters insurance seems high to me. A lot of people say $10-$15 or say it was free with car insurance. I pay $20, but I haven't shopped around.

There are many benefits to renters insurance. One is the "duty to defend." Anyone can sue anyone for anything. They may not win. That doesn't mean you won't want a lawyer to defend you. Your renters insurance probably has a general personal liability clause with a duty to defend. If your dog bites someone (even at the park) or you leave the water on and flood your neighbor's apartment, or even if someone files a totally frivolous claim, you can try to get your insurance company to pay the lawyers.

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Re: New Grad: Am I Living Beyond My Means?

Postby Bichon Frise » Tue Oct 16, 2012 2:59 pm

So, how does renter's insurance differ from an umbrella policy? or perhaps, a better question, if one owns both, which one pays out if someone was to sprain their ankle tripping over the hose.

if it matters, and it is a bit of skewed sample, I have never known anyone who has known anyone who has been sued for anything. Perhaps my crazy uncle, but since he holds himself aloof, I still don't know a single person who has been sued.

put me in the camp that renter's insurance, albeit cheap, is a waste of money.
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Re: New Grad: Am I Living Beyond My Means?

Postby timwalsh300 » Tue Oct 16, 2012 3:59 pm

Bichon Frise wrote:renter's insurance, albeit cheap, is a waste of money


Perhaps the liability portion...

But the portion covering my personal property still seems to be worthwhile at $10/month. If the apartment building burns to the ground (or there is some other disaster), yeah maybe I can sue my landlord. How much would that cost me in lawyer's fees? How many months before the landlord is found to be at fault and I get the $25k to replace all of my furniture, clothing, kitchen stuff, electronics, and so on? I don't think most renters would be able to take that big of a hit.

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Re: New Grad: Am I Living Beyond My Means?

Postby DoingHomework » Wed Oct 17, 2012 5:30 am

Bichon Frise wrote:So, how does renter's insurance differ from an umbrella policy? or perhaps, a better question, if one owns both, which one pays out if someone was to sprain their ankle tripping over the hose.

if it matters, and it is a bit of skewed sample, I have never known anyone who has known anyone who has been sued for anything. Perhaps my crazy uncle, but since he holds himself aloof, I still don't know a single person who has been sued.

put me in the camp that renter's insurance, albeit cheap, is a waste of money.


An umbrella policy is excess insurance. You normally have to cover basic liability first through a homeonwer's policy and high limit auto insurance. Presumably if you rent then you'll need to have a renter's policy in force to maintain the umbrella.

We have had that "risk of being sued" discussion with our real live, experienced attorney. His advice was that being successfully sued is extremely unlikely except in association with a few obvious risks like driving a car or owning property. And insuring against those liabilities is very cheap. An umbrella policy up to the value of your assets is a further, relatively cheap, means for discouraging a predatory lawyer/victim from suing you because they know they would have a fight.

We maintain very good insurance coverage including an umbrella policy. Admittedly it is largely just buying peace of mind. But I probably spend more on beer in a year than insurance and I suspect the insurance is the wiser purchase.

Having said that, I'm not sure how renter's insurance plays into that because there is simply far less liability exposure associated with being a renter as compared to an owner. As LeRaindrop pointed out, that exposure probably varies by state. I am most familiar with my state and here I have never heard of a renter ever having been held liable for anything that happens on a property they occupy. It always comes back to the owner.

There is also that old "blood fro a turnip" issue too.

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Re: New Grad: Am I Living Beyond My Means?

Postby Bichon Frise » Wed Oct 17, 2012 7:20 am

I've only rented in 4 states, and none of my contracts stipulated renter's insurance. To each their own.

I'd still skip the renter's. Admittedly, I'm an insurance curmudgeon.
Bichon Frise

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avocado wrote:Good to see you back, I was starting to miss your incisive commentary!

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Re: New Grad: Am I Living Beyond My Means?

Postby stannius » Wed Oct 17, 2012 3:03 pm

The last place I rented required renter's insurance, though apparently it was boilerplate language in the contract my landlord used. When I asked him a question about it, he didn't know the clause existed.

I agree, you should probably have it, and it should probably cost $10-12 per month.

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Re: New Grad: Am I Living Beyond My Means?

Postby StarryC » Thu Oct 18, 2012 12:36 pm

Doing Homework is right about the umbrella. The renters/ homeowners/ business/ auto isurance is "primary" and the umbrella is secondary. I would only advise an umbrella if you have something to protect- large savings, stocks, second homes, etc.

I can't tell you statistically how many people get sued a year. I can tell you I am a lawyer and defend people under their insurance policies. I have more than 1 renters policy case right now. I'd say it is more important if you rent a house than an apartment. Someone could trip on your sidewalk, fall off your roof, or drown in your pool in a house. The possessor of property is usually at risk for those types of injuries.

In an apartment the injuries in the common area won't be the tenant's problem. But, let's say you negligently trip and knock over a litigious old woman at the park. Or you have a house sitter who brings a child who is harmed by the draino you keep unlocked. Or you feed your allergic friend peanuts. Or you light of a firework that harms someone. Or your kid accidentally shoots someone's eye out. You could get sued for any of those things. Your renter's insurance would defend, usually.

My own policy says: Pays when you're legally liable for someone else's bodily injury or property damage resulting from an accident, negligent acts by you or qualified household members (on or off premises) and the acts of your pets. Includes costs to resolve claims or defend lawsuits brought against you.

No one thinks they will get sued until they do get sued. Also, your landlord might be responsible if your stuff is destroyed or you have to move out temporarily. But your insurance might pay you FASTER and then deal with your landlord for you.

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Re: New Grad: Am I Living Beyond My Means?

Postby DoingHomework » Thu Oct 18, 2012 1:45 pm

StarryC wrote:I would only advise an umbrella if you have something to protect- large savings, stocks, second homes, etc.

No one thinks they will get sued until they do get sued. Also, your landlord might be responsible if your stuff is destroyed or you have to move out temporarily. But your insurance might pay you FASTER and then deal with your landlord for you.


Insurance is a funny animal. I think most people overpay and don't think it through. The first couple of thousand of coverage is by far the most expensive. Almost all of us have a fairly high chance of having something happen that costs us, say $50. Maybe you negligently spill wine on someone and ruin a $50 blouse. If you tried to insure against those kinds of things it would be very expensive just because of the likely frequency and the costs to process claims. That's why there are deductibles. If you increase your deductible and self-insure for the initial risks you save a bundle.

Basically, I'm not worried about covering a $1000 bill if someone truly gets injured on my property because that's not going to change my life. But I do want to make sure a $100000 bill is covered if something truly bad happens and I am liable.

Plus, when you have a lot of assets you can become a target. It's not that hard for lawyers and investigators to find assets you might have. They're not going to bother suing you if you have $30 to your name. But if they can find a couple of million in real estate, investments, and so forth it becomes far more likely that you will be sued if something bad happens.

There is an entire field called "asset protection" that deals with that kind of thing. Insurance is part of it but there are lots of other techniques that people use to make themselves less sue-able when they have higher than normal risks. And it does not take as much as you might think before it makes sense to go down that road. I've read that some actions become sensible when you have as little as half a million in assets and by the time you have as little as $3 million it is all but necessary to have some plan in place. For most people the first step is an umbrella policy or professional insurance. But there are plenty of small time landlords or professionals that use more sophisticated steps even when they don't have much more than many people here.

Look at the OP - if you add up the house, the 401k, and a couple of other things he mentioned you're already close to that $500k number.


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