Buying a renter’s policy can insure against regret

Suppose the tenant above your apartment leaves the bathtub running. The overflow cascades into your unit. Your couch, carpet and TV are ruined.

So, who pays for the mess?

You’re in luck if the neighbor has renter’s insurance. But if the neighbor -- and you -- don’t, both sides will likely foot the bill. And that’s the rub: Most renters are not insured for such catastrophes.

Fewer than 20% are estimated to possess this specialized insurance. Why? Renters often think they don’t own enough property, or they assume calamities are the landlord’s problem, said Kevin Loyet of the Dana Co., a Des Moines-based property insurer. But the fine print in many leases excuses owners from virtually any sort of responsibility.

“People find out the hard way, and then it’s too late,” Loyet said. “You need to be prepared for a worst-case scenario.”

A close relative to homeowner’s coverage, renter’s insurance protects in two ways. The primary mission is to insure belongings from theft or damage. It also shelters the policyholder from liability or lawsuits.

Property amounts covered by renter policies are minuscule compared with homeowners insurance. Typical coverage is $20,000 to $30,000 worth of loss or damage, plus $300,000 in liability coverage. The cost: about $12 per month.

While these insured amounts may seem astronomical if not irrelevant to most young renters, Loyet said tenants amass goods and property at a surprisingly rapid clip.

“If everything burns up tomorrow in a fire, you don’t realize how much stuff you build up over time, like a wardrobe,” he said.

Look for policies offering full replacement value. Loyet noted that as some items plunge in retail price, notably computers and big-screen TVs, the replacement cost would be below what was originally paid for the item.