Insurance is a means of protection from financial loss. It is a form of risk management primarily used to hedge against the risk of a contingent, uncertain loss.
An entity which provides insurance is known as an insurer, insurance company, or insurance carrier. A person or entity who buys insurance is known as an insured or policyholder. The insurance transaction involves the insured assuming a guaranteed and known relatively small loss in the form of payment to the insurer in exchange for the insurer's promise to compensate the insured in the event of a covered loss. The loss may or may not be financial, but it must be reducible to financial terms, and must involve something in which the insured has an insurable interest established by ownership, possession, or preexisting relationship.
The insured receives a contract, called the insurance policy, which details the conditions and circumstances under which the insured will be financially compensated. The amount of money charged by the insurer to the insured for the coverage set forth in the insurance policy is called the premium. If the insured experiences a loss which is potentially covered by the insurance policy, the insured submits a claim to the insurer for processing by a claims adjuster.
With tightened lending practices following the popping of the housing bubble and the number of low-cost rental properties on the market, more and more people are turning to renting rather than buying. For those of you out there who are moving into your first rental, from students to former homeowners getting back to the rental circuit, there are a lot of things you should be aware of. Like any contract, leases are always different, and you really should read the fine print. With all of that said, let's take a look at some lease conditions that you should know. (For more, see To Rent Or Buy? The Financial Issues.)
Lease Length
There are a few key things you should know before getting started renting. First is the length of the lease. Depending on which state you live in, and your landlord's preferences, you can get weekly, monthly or yearly leases. This is something to consider when you're first looking, as most landlords advertising places for rent will tell which kind of lease type it is.
So, if you're a student who moves back in with your folks for the summer, you might want to try and get a monthly lease type so that you don't have to go through the headache of subletting (more on that later), but if you know you want to stay put for a while, go for the yearly lease so that there aren't any sudden changes if the landlord decides they want to jack up the price or rent to someone else next month. Breaking a lease is rarely legal, so be sure you'll be able to fulfill the time frame of your lease before signing it. (Read more, in There's More To It Than Money.)
Security Deposits
In most states, there is a limit on how much a landlord is able to charge for a security deposit. In some states, like Hawaii and Massachusetts, the limit is a single month's rent, and in others like Iowa and Arkansas it's two months. There are many states where a landlord can ask for whatever they want, like in non-rent controlled apartments in New York.
In New York, however, a landlord must place your security deposit into an account when you give it to them, and if you cause no damage above regular wear and tear, the landlord has to return your deposit, along with the interest, minus a 1% administration fee. Every state is different, however, so it's best to check your state's renters' rights to see what your landlord is allowed to charge you, what the details are on deducting for damages and the time span that is legally required for them to return your deposit.
Extra Charges
"Key money," is usually not allowed, and if anything all deposits should be included within the damage deposit. In New York, extra charges like key money are illegal as they are basically a way for landlords to give themselves a bonus for finding a tenant. In highly sought after areas, like expensive neighborhoods around colleges, the former tenants will sometimes want a bonus or finder's fee for passing on their apartment to you. This is not legal, but it can be hard to prove. It's not advisable that you pay this, as you'll just support this trend. There will be other places out there that won't cost you a finder's fee - keep looking. (Figure out if you're ready to take the plunge, in Are You Ready to Rent?)
Adding Roommates, Extra Tenants and Subletting
If one of your roommates moves out, it's best to let that landlord know rather than try to sneak in a new person. For the most part, given that there are no drastic changes, a landlord will be fine with the change, as long as it doesn't go over the occupancy limit.
For subletting: when you're tied into a lease and you lease out your apartment to someone else for a shorter period, let your landlord know, and you can obtain legal subletting forms. If you try to do it without telling your landlord, you might wind up without a leg to stand on if the subletter refuses to pay rent, or damages your apartment. When subletting, you can be on the hook for advertising the apartment and finding the right tenant. (Is now the right time? Find out, in Take Advantage Of A Housing Crisis - Rent!)
Your Landlord's Responsibilities
Your landlord is responsible for quite a bit, which is sometimes the reason that people prefer to rent rather than buy. There are always laws regarding how many smoke and carbon monoxide alarms must be present in and around your apartment. As well, your landlord is on the hook for all major repairs (as long as you didn't cause them, then it'll come out of your damage deposit) and problems with your place. So, when something goes wrong, don't be afraid to ask that it be set right.
Look up the rules for your state and find out what your rights are as a tenant. If your landlord doesn't comply with your polite requests, remind them of their legal obligations. This also goes for making sure there is hot water in your apartment, heat requirements, no leaking pipes, no broken windows and more. There are also laws to protect tenants from facing their landlord's wrath; if you ask for something that your landlord legally has to supply, you are usually protected by harassment and intimidation laws relating to the landlord-tenant relationship. As well, there are always rules about when a landlord is allowed to enter your apartment, and the notice that must be given. Look it up and make sure you don't have to deal with any surprise visits.
The Bottom Line
Every state will have different rules, so it's very important to look them up before you look for a lease to sign. The aforementioned are the more important points, but if you have any more questions ask your landlord or local housing authority. Lastly, make sure everything you discuss with the landlord is written on the lease; if it's not in writing, it's not worth anything.
