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.
If you're just graduating from college or have plans to rent your first apartment in the near future, this may be the first time you've entered into a contract. Your parents might end up cosigning, but this isn't something to take lightly.
This might be your first apartment, but probably not your last. You might change schools before graduating or elect to rent after college while you pay off loans or build a career. You may also relocate for your career. When you rent your second apartment or home, your prospective landlord will likely ask for the name and contact information for your last landlord to see if you were a problem-free tenant.
Next, renting can affect your credit score. Although paying your rent on time isn't something that currently affects your credit score, if you don't pay your rent on time, you're likely not paying your other bills on time either. Renting can help you form good money management habits. Here are a few other renting tips before signing the contract.
Don't Overspend
The conventional wisdom is to not spend more than 30% of your annual salary on housing expenses, but that's a difficult task if you're a college student with a minimum wage job. If you have to pay more than what you're bringing in each month, something will have to be cut. Cable TV and high-priced cellphone plans are a luxury. You need shelter before you need HBO.
Don't Forget Utilities
Housing costs include more than your rent. They also include utilities like gas, electric, water and luxuries like cable if you can afford it. It's also best to buy renter's insurance if a lot of people will be in your apartment. Renter's insurance covers all of your assets that you keep in the apartment. If there were a fire, the landlord will not replace your assets. They are only responsible for the structure. Expenses associated with utilities add up quickly. Make sure you have approximate costs of utilities before signing the lease.
The Neighborhood
You might not care about the quality of the landscaping in the neighborhood, but high crime rates will make your auto insurance go up. If you're moving for school or a new job, the further away you live, the more you'll spend on gas to get there. If you're going to move, live close to your primary destination. Biking or walking saves a lot of money if you can live that close, but every dollar you save on gas is one more dollar you can take off of the cost of the apartment when you budget.
Do a Walkthrough
There are reports of scams where thieves posing as landlords put an ad on Craigslist with an apartment or home for rent. However, because of some seemingly good reason, they can't take you inside. All you have to do is send the security deposit and they'll set up the showing.
No money should change hands without the landlord taking you inside the structure first. Everything should be in writing. If you're dealing with an individual, ask to see this or her driver's license and write down the number. If it's a home, do some research to make sure it's not currently in foreclosure or has any other liens.
The Bottom Line
Renting your first apartment is exciting and it represents freedom and personal responsibility, but take your time, do your research, and ask for help when you need it. It's likely that the apartment you can afford and the apartment you want are two very different places. Go with what you can afford. It will save a lot of stress and if you're a college student or somebody just starting a new career, you'll have plenty of stress already.
