Does Renters Insurance Cover Living in a Home That Is Being Foreclosed?

Note all your possessions before you buy renters insurance.

Note all your possessions before you buy renters insurance.

The property you rent becoming a foreclosure is always a possibility. While it is a good idea to buy renters insurance, you don’t need it to protect you if the home you rent is being foreclosed. You have federal protection for that. The best thing you can do is to understand what renters insurance covers and what your rights are regarding foreclosed property.

Federal Law

The Protecting Tenants at Foreclosure Act of 2009 protects you, the renter, from being evicted immediately upon foreclosure. Before the act became law, renters were often forced out of their rental homes with little notice. Under the law, the new owner of the foreclosed property must provide you with a notice giving you 90 days to move out. If you have a lease that entitles you to stay longer, the new owner must abide by the lease agreement unless the new owner plans to occupy the property himself. Then, the 90-day rule applies. You are actually better off under the Protecting Tenants at Foreclosure Act than you were during a month-to-month tenancy. In that case, the landlord generally only needed to give you 30 days to vacate; under the act, you get 90 days.

Definition of Renter

To qualify for protection under the Protecting Tenants at Foreclosure Act, you must be a bona fide tenant. Being bona fide in this case means that you cannot be the mortgage holder or the child, spouse or parent of the mortgage holder. The rent you are paying cannot be way below the fair market rent for your area.

Why Have Renters Insurance

If you are a renter, you should have renters insurance to protect your possessions. If you don’t have renters insurance and a fire or flood occurs or if you are robbed, you could lose everything valuable you own. It is usually cheap and easy to buy, said Donna Freedman of MSN Money. Renters insurance can also cover the cost of your hotel stay while you are waiting to get back in the rental house in situations such as a fire that makes your rental unit uninhabitable.

Tips for Renters Insurance

Document your property by taking pictures of it or by videotaping the rooms in your house. Also, note the serial number of big-ticket items, and save receipts for anything you buy. Let a friend or relative hold the pictures or video for you; if the house were damaged in a flood or fire, the pictures or video could be ruined. Freedman recommends that you document your property after the holidays when you are likely to get some nice gifts. Get quotes from different insurance companies. Start with your auto insurance company because you might get a discount on renters insurance.

About the Author

Laura Agadoni has been writing professionally since 1983. Her feature stories on area businesses, human interest and health and fitness appear in her local newspaper. She has also written and edited for a grassroots outreach effort and has been published in "Clean Eating" magazine and in "Dimensions" magazine, a CUNA Mutual publication. Agadoni has a Bachelor of Arts in communications from California State University-Fullerton.

Photo Credits

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