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.
Under some all-perils renters insurance policies, roommates can share insurance by both being listed as named insureds on the policy. Some states and carriers do not allow sharing of policies.
Coverage Limits
When looking for a renters insurance policy, both roommates should agree on a level of coverage to cover all of their belongings together. Any high-value items should be scheduled on the policy. Speak with a licensed insurance agent when searching for and obtaining adequate coverage to meet your needs.
Benefits
One benefit of renters sharing policies could be a lower premium than if each insured had separate coverage. When filing a claim on one policy, only one deductible would apply instead of multiple deductibles.
Things to Consider
Roommates should create a contract outlining who is responsible for the deductible in the event of a claim to only one tenant's personal property. All personal property should be inventoried, with photographs of the items, prior to the insurance coverage taking effect. This will also help tenants determine who is owed what in the event of a claim.
Renters may believe sharing a policy will be cheaper and easier in the short term. Roommates should realize the potential problems that could arise between the parties during a claims process.
Replacement Cost
The replacement cost option is available for renters insurance policies. Replacement cost ensures that insureds receive enough compensation to purchase new items of like quality to replace the damage property. If replacement cost is not selected, then claims are settled on an actual cash value basis, which takes depreciation into account. Roommates sharing coverage would have a much better claims experience with the replacement cost option.
