Renters Insurance | Boizelle Insurance Partnership
Understanding Rent-to-Own Agreements
Rent-to-own (RTO) agreements, also known as lease-to-own agreements, allow tenants to rent a property (or other assets like appliances or furniture) with the option to purchase it later. This can be a useful way to gradually build equity or ownership, but it comes with both benefits and potential drawbacks. Here’s what you need to know about rent-to-own arrangements:
- Basic Structure
- Rental Period: You rent the property or item for the a specified period (usually 1 to 3 years).
- Option to Buy: At the end of the lease, you have the option to buy the property or item at a predetermined price. This price may be fixed or based on an appraisal.
- Rent Payments: Part of the rent payments may go toward the eventual purchase price, building equity over time.
- Option Fee: You often pay a one-time, non-refundable option fee upfront. This fee can be credited toward the purchase price if you decide to buy, but it is typically lost if you choose not to purchase.
- Pros of Rent-to-Own
- Build Credit and Savings: If you’re unable to secure financing for a home or other items upfront, an RTO agreement lets you rent while saving money for a down payment or improving your credit score.
- Lock in a Purchase Price: By agreeing on a purchase price at the start, you can potentially benefit if the market value of the property or item increases.
- Test Before You Buy: Renting-to-own allows you to live in a home or try out an item before fully committing, giving you time to ensure it’s right for you.
- Cons of Rent-to-Own
- Higher Rent Payments: Rent may be higher than a standard rental, as part of the payment is going toward the eventual purchase.
- Non-Refundable Fees: The upfront option fee and any rent premium paid towards the purchase are usually non-refundable. If you decide not to buy, you lose that money.
- Risk of Loss: If you decide not to buy or can’t afford to purchase at the end of the lease term, you could lose the property or asset along with any money paid toward it.
- Maintenance Responsibilities: In may RTO agreements, the renter may be responsible for maintaining the property or asset, which can be an added financial burden.
- Market Fluctuations: The agreed-upon purchase price might end up being higher than the market value if property values decline or if the item becomes outdated.
- Important Considerations
- Option to Purchase: Always check the details of the option to buy. Understand whether the purchase price is fixed or if it can be changed based on market conditions or other factors.
- Length of Agreement: The length of the lease is important because it impacts how much you can save for the eventual purchase and the final purchase price.
- Ownership Rights: Clarify whether you have the right to make modifications to the property or asset and whether it’s considered “yours” during the lease.
- Legal Advice: It’s wise to have a lawyer review the agreement to ensure the terms are fair, especially regarding the option fee, rent credits, and the final purchase price.
- Alternatives
- Traditional Rental: Renting without a commitment to buy gives you flexibility and fewer risks, but you won’t build equity or own the property.
- Government Programs: There are homebuyer programs for first-time buyers that may offer more favorable terms than a rent-to-own contract.
- Lease Purchase vs. Rent-to-Own: A lease purchase is a slightly different model where you are obligated to purchase the property at the end of the lease. In contrast, rent-to-own gives you the option, not the obligation, to buy.
- Who Should Consider Rent-to-Own?
- People with Credit Issues: Rent-to-own is a potential option for individuals with poor credit or insufficient savings to buy a home outright but who are confident that the can secure financing in the future.
- Uncertain About Long-Term Commitment: Rent-to-own can be useful for those unsure if a home or item is right for them in the long run.
- Those Who Need Time to Save: Rent-to-own arrangements can give you the time to save for a larger down payment or make improvements to your credit score.
To summarize, rent-to-own can be a good option for those who want to own but aren’t ready financially or credit-wise yet, but it’s important to fully understand the terms and risks involved.
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What Should My New Year’s Resolution Be With Regard to My Insurance?
The coming new year is always a time when people feel inspired to assess their accomplishments of the previous year and to see how they can make improvements to their moving forward. From traveling more to getting into the best physical shape of your life, the ideas certainly can make up a long list. But, when was the last time you thought about your insurance coverage? Are you sure that you have enough in place? What if something disastrous happens? Will you be covered? Are your current coverages sufficient enough to cover the damages? Now may be a good time to consider giving us a call!
- Review and Update All Policies
- Why: Over time, your life circumstances (new job, home purchase, family changes) may affect your insurance needs.
- Action: Make it a habit to review your auto, home, life, and health insurance policies annually. Ensure that your coverage amounts are still appropriate and that you’re not overpaying for unnecessary coverage.
- Increase Your Deductibles to Save Money
- Why: Higher deductibles generally result in lower monthly premiums.
- Action: If your financial situation allows for it, consider increasing your deductibles to save on premiums. Just make sure you can afford the higher deductible in the event of a claim.
- Add or Review Supplemental Insurance
- Why: Sometimes, basic coverage isn’t enough for certain needs.
- Action: Look into adding supplemental policies like disability insurance, critical illness insurance, or an umbrella policy if you think additional protection is needed.
- Ensure You Have Enough Life Insurance
- Why: Life insurance should reflect the current needs of your family and dependents.
- Action: If you’ve had major life changes (e.g. marriage, children, or a home purchase), review your life insurance policy to ensure it’s adequate.
- Focus on Preventative Health Measures
- Why: Good health insurance can be more affordable and valuable when used for preventative care.
- Action: If you have health insurance, make sure you take advantage of preventative care benefits. Staying healthy can help reduce overall healthcare costs and premiums.
- Set a Goal for Claims-Free Status
- Why: Maintaining a claims-free status can lead to discounts and fewer premium increases.
- Action: Try to minimize accidents or damages, and avoid unnecessary claims to keep your rates low.
- Read and Understand Your Policies More Thoroughly
- Why: Knowing the ins and outs of your coverage will help you make informed decisions.
- Action: Take time to carefully read your policy documents and learn about your coverage limits, exclusions, and claims process.
- Consider an Umbrella Insurance Policy
- Why: It offers extra liability coverage beyond your home and auto insurance, which can be beneficial for unexpected situations.
- Action: Research whether an umbrella policy fits your needs for an extra layer of financial protection.
- Assess Your Auto Insurance Coverage
- Why: Driving habits, the type of car you own, and even the area in which you live can influence how much coverage you need.
- Action: Reevaluate your auto insurance limits, considering factors like commute distance, vehicle value, and driving history.
Making a resolution to stay on top of your insurance ensures you’re both financially protected and not overpaying for your insurance.
Read moreWhat Is Renters Insurance & Why Do I Need It?
Renters insurance is a type of insurance policy designed to protect you if you rent your homes (apartments, houses, condos, etc.) rather than own them. It typically provides coverage for personal belongings, liability protection, and additional living expenses in case your rented property becomes uninhabitable due to covered losses like damage from fire or water.
Here’s why you might need renters insurance:
Protection for Personal Belongings: Renters insurance helps cover the cost of replacing or repairing your personal belongings, such as furniture, electronics, clothing, and jewelry, in case they are damaged, destroyed, or stolen due to covered perils like fire, theft, vandalism, or certain natural disasters.
Liability Coverage: If someone is injured while visiting your rented property and you’re found legally responsible, renters insurance can help cover the associated medical bills or legal expenses. It also provides coverage if you accidentally cause damage to someone else’s property.
Additional Living Expenses (ALE): If your rented property becomes uninhabitable due to a covered event, renters insurance can help cover the cost of temporary accommodations, such as hotel stays or rental expenses, and other necessary living expenses like food.
Affordability: Renters insurance is generally affordable, especially compared to other types of insurance like homeowners insurance. The cost varies depending on factors such as your location, the amount of coverage you need and the deductible you choose.
Peace of Mind: Having renters insurance can provide peace of mind knowing that your personal belongings are protected and that you have liability coverage in case of unforeseen events. It can help you avoid significant financial losses due to unexpected incidents.
Even though landlords have insurance for the property itself, it typically doesn’t cover tenants’ personal belongings or liability. Therefore, renters insurance is essential for renters to protect their possessions and finances.
Read moreHow Insurance Can Protect You Through the Years
They say that the only constant in life is change. And that’s true whether you’re 18, 80 or somewhere in between.
One thing to consider when life changes is your insurance coverage. Here are six common transitions that your Erie Insurance agent can help you navigate.
You’re off to college.
With Erie Insurance, full-time students younger than 24 are automatically covered under their parents’ homeowners policy. Part-time students (or students who are 24 and older) may need to take out a renters insurance policy. If you choose to live in an apartment instead of a dorm, think about purchasing a separate renters insurance policy. (Learn more about renters insurance below.) When it comes to car insurance, you don't need your own policy if you’re taking a family member’s car to school. If you’re a co-owner on the vehicle or if you own your own car, you probably need your own policy.
You’re renting your first place.
You found the perfect place, but since your landlord’s policy doesn't typically cover your stuff, you’ll want to look into getting your own renters policy. In addition to protecting your belongings, a renters policy also provides worldwide liability protection for a situation like harming someone while riding your bike. If someone is hurt in your apartment, your policy most likely would pay his or her medical bills. A renters policy will often cover additional living expenses if your apartment is damaged and you can't stay there because of something like a fire. There are many affordable options—plus, you can qualify for a discount if you purchase both a renters and an auto policy from ERIE. In some cases, the discount can pay for pay for most (or all!) of the renters policy.*
You just got married.
If you’re just starting out, you'll definitely want to look into life insurance. Life insurance can be the most affordable way to help ensure that you or your new spouse is able to carry on if the unthinkable were to happen. Also remember to ask about your auto insurance. You could qualify for discounts, including a multi-car discount if both cars are insured by ERIE. Finally, you may need extra coverage on an engagement or wedding ring. With an Erie Insurance homeowners or renters policy, your coverage for lost or stolen jewelry is capped at $3,000. So if your ring is worth more, you'll want to consider separate coverage.
You welcomed a bundle of joy.
You may have binkies, diapers and formula on your mind, but another thing to consider is life insurance protection for your family. Everyone needs financial protection—even a stay-at-home parent. With life insurance, you can provide for your loved ones even if…well, you're not there.
You retired and are renting a place somewhere warm for the winter.
No penalty for sand between the toes! If you're going south, an extra policy is not needed in the majority of cases. That said, a lot depends on the policy you already have, how long you’ll be gone and what kinds of things you’ll be taking to your temporary home. For these reasons, it’s a good idea to check in with your agent before you head south.
You or a loved one is entering an assisted living facility.
When it's time for help with care, it’s a good idea to consider a renters policy if you or a loved one is entering an assisted living facility. A renters policy covers belongings—and, more important, personal liability. For instance, renters insurance could cover your loved one if he or she was responsible for injuring someone.
Many people can't afford to pay big medical bills out of pocket, so definitely contact your Boizelle Insurance before making the move. Life may change, but one thing that doesn’t is being able to rely on us. You can always turn to us when it comes to making sure you’re protected at every stage of life.
*Individual policies may differ.
Originally by: Amanda Prischak, Erie Insurance
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