Buy Renters Insurance!

One of my proudest moments as an advisor came before I knew that I wanted to be one.  And I can’t talk about insurance without telling the story that served as a pivotal point in Ben’s life and showed me one of the benefits of giving people good financial advice. 

In 2004, Ben and I lived in different cities – me in Boston for law school and him in New Jersey for work. One early February morning, I get a call from him and the first thing I hear is, “My house burned down.”  I couldn’t quite comprehend what was going on 1) because it was around 4 in the morning, and 2) because I could hear a lot of commotion – sirens, people yelling from across the street, and of course, Ben in a panic. 

The refrigerator in the basement apartment blew a fuse and his entire building went up in flames. Everyone got out okay, but Ben lost everything.  Luckily, he had taken my advice and purchased renters insurance when he moved into the place.

So instead of freaking out about where he would get money to live (he was pretty broke at the time), his insurance company gave him a large check to replace his belongings, paid for substitute housing for six months, and gave him immediate cash for his living expenses.

He often tells people his life would be totally different had he not had the insurance. He would likely still have credit card and other consumer debt, he wouldn’t have been able to move to Boston with me, and he might not have chosen his current career path.

Unfortunately, his building mates weren’t so lucky. None of them had insurance.  And yes, they managed to still get through the tragic event, but I would bet they still feel the financial impact of the fire a decade later.

Renters insurance (also known as HO-4 insurance) is too cheap for you not to have if you lease a place.  For about $12 per month, you can get a policy that will cover $30,000 worth of your personal property and give you $100,000 in liability coverage. Even if you need more insurance, you get a huge bang for your buck with this type of policy.  When determining how much to purchase, you should use the same analysis that I suggested for your car insurance to make sure you’ve protected your net worth and income.

Insurance can’t replace everything that a tragic event can take from you, but it at least allows you to concentrate on getting over that loss without the financial burden as well.