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.
The amount you spend on rent each month can have a significant impact on your overall financial picture. It's likely to be your highest monthly expense, and it's also a recurring cost that you can't reduce once you've signed the lease. Particularly when you're just starting out, letting your rent take up too much of your paycheck can have not just short-term but also long-term negative effects on your bank account.
In the short term, high rent can detract from your ability to go out with friends or take vacations. In the long term, the consequences are much more significant. If you don't have enough leftover cash to save up an emergency fund, a bad month or bout of unemployment could land you in credit card debt. If you don't have enough room in your budget to save for retirement, you'll put yourself at a disadvantage by giving up valuable years of compound-interest power. If you have existing debt, overly high rent can slow down your payments and increase the interest you owe. Spending more than you have to on rent also postpones the day when you'll be able to call yourself a homeowner. Fortunately, there are many strategies for reducing your rent. (To learn more, read To Rent Or Buy? The Financial Issues and Build Yourself An Emergency Fund.)
Reconsider Your Location
If you want to live in a highly desirable area, you will pay a pretty penny for the privilege. On top of that, in some densely populated neighborhoods, you may also have to pay an additional monthly fee for a parking space. However, if you live just a few miles away from the hip neighborhoods, you can still easily take advantage of their amenities while paying substantially less. Also, when you live within easy walking distance of the grocery store, shops, restaurants, movie theaters and bars, it's much easier to make impulse purchases or overspend on entertainment. Living further away will force you to give a little more thought to your shopping trips and thus can help you to control your spending.
Keep in mind, however, that there is a balance to be struck. The higher-paying jobs are often in the same areas that are the most desirable to live in. If you work in one of these areas, don't locate too far away or the savings in rent will get eaten up in the form of increased transportation costs and a reduced quality of life from all the time you'll spend commuting. (Don't have the cash to buy your own home? Read Are You Ready To Rent? and Get Your Foot In The Door With Rent-To-Own.)
Be Flexible in your Definition of "Nice"
Instead of looking for an apartment with granite countertops and stainless steel appliances, "nice" might simply mean a place that is free of maintenance problems, insect infestations, safety issues and bad neighbors. You're unlikely to find a shiny new dream apartment for a bargain price, but if you can overlook things that will have very little impact on your quality of life (like shabby carpets that can be covered with area rugs or an ugly building exterior that you'll rarely have to see) when everything else about the place meets your criteria, you'll be able to snag that gem that others may have dismissed. (For related reading, see Downshift To Simplify Your Life.)
Get a Roommate (or Two or Three)
Acquiring just one roommate can shave 30% off your basic living expenses - rent, utilities and even food, if you're willing to share groceries. If you're willing to sacrifice some privacy and peace and quiet, having roommates can allow you to spend less, get a nicer place or live in a nicer location. If you play your cards right, you may even be able to capture all three of these advantages.
Look for the Exception, Not the Rule
Although it can require a significant investment of time, patience, and flexibility (including flexibility with your move-in date), finding an apartment at below the market rate is not impossible. In addition to perseverance, you'll need some familiarity with the market. Do the research in advance so you'll know what constitutes a high, low and average rent in your target neighborhood. You'll also have to stay on top of the listings so you'll be able to view places as soon as they go on the market. Apartments that are a good value get snapped up fast.
To further put yourself in a position to take decisive action if you find the right place, know what you're looking for. Make a list of qualities that your apartment must have, must not have and would be nice to have. Also, when you're out looking, be sure to bring with you all the information you'll need to complete your application, particularly information you may not have memorized. Be ready to submit an application on the spot by having your Social Security number, employment history, personal references, and the names and numbers of any previous landlords on hand. In competitive markets, don't hesitate to attach a short note to your application detailing why you'll make an ideal tenant - this will set your application apart from the others.
Be patient, though. There are a lot of low-quality and overpriced apartments out there. You'll probably have to kiss a lot of frogs before you find your prince, but don't settle for less than what you really want - you're going to be spending a lot of time in this place. Also, listings are sometimes outdated and you may think you've found your new home only to learn that someone else has already rented it. The more places you look at, though, the better you'll be able to evaluate each additional apartment you view. Keep in mind, however, that many places charge a modest fee (typically $25 to $50) to run your credit and otherwise process your application, so keep the application process saved for the ones you're truly interested in. (To get your credit rating in shape, read Five Keys To Unlocking A Better Credit Score.)
Above all, know that just because the going rate for units in your target neighborhood is a certain price, this doesn't mean you have to pay that much. Just as there are upscale units that may cost well above that price, there are also bargain units that will cost less.
Get the Details
If your application is approved, don't impulsively sign the lease. First, ask your potential landlord lots of questions about the unit before you contractually obligate yourself to a year's worth of rent. Ask if the unit and building have had any insect or rodent problems or other significant issues, and if there are any noise issues. Perhaps your neighbor-to-be has a baby or there is an airport nearby that you weren't aware of.
Also, be wary of large deposits. In most areas, it's possible to move in with just the first month's rent and a deposit equivalent to one month's rent. Some landlords will ask for the first month's, last month's and a deposit, but that can be hard to come up with when you're young and better off investing that extra money. Local laws will dictate legal limits for deposits - check out NOLO's (www.nolo.com) easy-to-understand tenant's guides for details (often available at the library). If you have a pet, it's normal to pay an additional pet deposit or even a small monthly "pet rent".
Know the Potential Costs of Any Outcome
Furthermore, be clear on the rules for breaking your lease before you sign it. If you end up hating the apartment or the neighborhood, what are your options for leaving? What if you have to relocate for a promotion or job change? Make sure the penalties for leaving and the rules for subleasing are clearly stated in your lease - don't take the landlord's word on anything.
The lease should also outline any fees for late rent payment or the repair of problems caused by you (such as unclogging a drain or letting you in if you lock yourself out). Also ask about the typical rate and amount of rent increases. Some areas have rent control or reasonable landlords who stick with cost-of-living adjustments; others will raise the rent as much and as often as the law allows.
The Bottom Line
If you're willing to make compromises on the less important things and you're willing to invest the time to read lots of ads and look at numerous places, you're likely to find the perfect apartment for you at the perfect price. The extra time and effort spent finding the right place will pale in comparison to the amount of time you can spend regretting rambunctious neighbors, a shoddy unit that's always needing repairs or a huge rent check that forces you to sacrifice other goals like taking a vacation, paying off debt or saving for a down payment on a house.
